Question

the government of balearic is concerned about a recession, so it decides to implement expansionary fiscal policy. how would this policy be depicted in an ad-as model?

expansionary fiscal policy would
○ shift the lras curve to the left.
○ shift the ad curve to the left.
○ shift the ad curve to the right.
○ shift the lras curve to the right and the ad curve to the right.
○ shift the lras curve to the left and the ad curve to the left.

Explanation:

Expansionary fiscal policy (e.g., increased government spending, tax cuts) boosts aggregate demand (AD) by increasing consumption, investment, or government spending. The long - run aggregate supply (LRAS) curve is determined by factors like technology, resources, and institutions, and expansionary fiscal policy in the short - run does not directly shift LRAS. So expansionary fiscal policy shifts the AD curve to the right.

Answer:

C. shift the AD curve to the right.