Which of the following statements is true?
A) Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor demand curve to the left.
B) Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor demand curve to the right.
C) Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor supply curve to the left.
D) Countercyclical fiscal policy stimulates an economy during a recession by shifting the labor supply curve to the right.

Question

Quizplus · Accepted Answer

Countercyclical fiscal policy aims to stimulate demand during a recession. By increasing government spending or reducing taxes, there is an increase in overall aggregate demand in the economy, including labor demand. This leads to a shift of the labor demand curve to the right, which results in a higher equilibrium wage rate and employment level.

Which of the Following Statements Is True