Question
Question 11 (a)When is expansionary fiscal policy effective at increasing aggregate output? When is it ineffective? Explain in words. [3 marks] (b)Suppose the government finances
Question 11
(a)When is expansionary fiscal policy effective at increasing aggregate output? When is it ineffective? Explain in words.
[3 marks]
(b)Suppose the government finances its expenditures by issuing bonds to the public. Do you think such government spending can lead to sustained inflation and higher aggregate output? Explain in words.
[3 marks]
(c) Explain in words and with a diagram why cost-push inflation and its likely impact on the price level creates a dilemma for a policymaker who wants to maintain real GDP growth and a low inflation rate.
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