“An increase in aggregate demand will tend to increase real output by a larger amount when unemployment is widespread than when the economy is operating at or near full employment.” Is this statement true? Explain.

*10. “If we set aside our reluctance to use fiscal policy as a stabilization force, it is quite easy to achieve full employment and price stability. When output is at less than full employment, we run a budget deficit. If inflation is a problem, we run a budget surplus. Quick implementation of proper fiscal policy will stabilize the economy.” Evaluate this statement.