(Last Word) in Response to the Great Recession, the Federal

Multiple Choice

(Last Word) In response to the Great Recession, the federal government engaged in significant deficit-funded spending.While it kept the recession from getting worse, and did result in some positive economic growth, it did not fully achieve the desired result.Which of the following best explains why the fiscal policy actions fell short of their objective?

A) Despite the fiscal stimulus, aggregate demand continued to shift to the right.
B) The fiscal stimulus caused a significant leftward shift of aggregate supply.
C) Offsetting monetary policy caused the aggregate demand to remain virtually unchanged, meaning that all gains in output came from aggregate supply shifts.
D) The fiscal stimulus shifted aggregate demand to the right, but not enough to restore full employment.