New Enroll in RBI Gr B 2025 Exclusive New Batch on March 18

    Question

    What is the effect of expansionary fiscal policy on

    output and unemployment?
    A Output increases and unemployment decreases Correct Answer Incorrect Answer
    B Output increases and unemployment increases Correct Answer Incorrect Answer
    C Output decreases and unemployment decreases Correct Answer Incorrect Answer
    D Output decreases and unemployment increases Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    Due to expansionary fiscal policy Output increases because IS curve shifts to the right as AD increases and unemployment decreases.

    Practice Next