Using the aggregate demand and supply model, expansionary fiscal policy will not affect the price level, but will restore full-employment GDP.

Question

Quizplus · Accepted Answer

According to the aggregate demand and supply model, expansionary fiscal policy will shift the aggregate demand curve to the right, resulting in a higher price level and higher output. Although it may increase employment and output, it may also lead to inflation in the long run.

Using the Aggregate Demand and Supply Model, Expansionary Fiscal Policy