If an economy is in a recession, with output below its full-employment level, a(n) ______ to return the economy to its long-run equilibrium, which would cause the price level to_____
A)expansionary; increase
B)expansionary; decline
C)contractionary; decline
D)contractionary; increase

Question

Quizplus · Accepted Answer

An expansionary policy, such as increasing government spending or reducing taxes, would increase aggregate demand and output, which would cause the price level to increase. This policy would work towards returning the economy to its long-run equilibrium level of output.

If an Economy Is in a Recession, with Output Below