Suppose the economy is initially in long-run equilibrium. the government enacts a policy to decrease taxes. in the short-run, this expansionary fiscal policy will cause: a. a shift from ad 2 to ad 1 and a movement to point c, with a lower price level and the same output. b. a shift from sras 2 to sras 1 and a movement to point d, with a higher price level and lower output. c. a shift from sras 1 to sras 2 and a movement to point b, with a lower price level and higher output. d. a shift from ad 1 to ad 2 and a movement to point b, with a higher price level and higher output.

D. a shift from ad 1 to ad 2 and a movement to point b, with a higher price level and higher output.

Expansive fiscal policy (expansionary fiscal policy) is a fiscal policy that is applied to a country by increasing the amount of state expenditure or government expenditure (G) and reducing the tax rate (T) to increase output or income (Y). Expansive fiscal policy also plays a role in breaking down or increasing people's purchasing power. In contrast to contractive fiscal policies that are suitable to be applied when a country's economy experiences inflation, expansionary fiscal policies are more suitable to be applied when a country's economy experiences a recession or depression.

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Expansive fiscal policy  

The Income Tax  

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Grade: High School

Subject: Business

Keyword: expansive, fiscal, tax

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