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    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.

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