Government expenditures create demand for goods and services. This is known as __________ and will cause AD to shift to the __________. a.) expansionary monetary policy; left b.) expansionary fiscal policy; right c.) contractionary fiscal policy; right d.) contractionary monetary policy; left SUBMIT MY ANSWER Report an issue with this question Kate Eskra Kate Eskra Sophia Tutorial Sophia Tutorial Monetary and Fiscal Policy: Impact on Aggregate Demand Sophia Tutorial Sophia Tutorial Make my favorite instructor PDF Version WHAT'S COVERED This lesson will discuss how monetary and fiscal policy work to stabilize and stimulate the economy through aggregate demand. Specifically, this lesson will cover: 1. Tools of Fiscal Policy vs. Monetary Policy 2. Expansionary Policy 2a. Multiplier Effect 2b. Overstimulation 3. Contractionary Policy 4. Phillips Curve 4a. Stagflation Terms to Know 1. Tools of Fiscal Policy vs. Monetary Policy These two graphs show two different situations when the economy is not in equilibrium. At equilibrium, the long-run aggregate supply (LRAS) curve intersects the point where the short-run aggregate supply (SRAS) and aggregate demand intersect. At times, our economy is producing below full employment, as shown on the left. In this case, there are unemployed resources, and unemployment is a concern. It