If government disregards or underestimates the multiplier effect, contractionary fiscal policy could cause aggregate demand to Blank______.

Question

Multiple choice question.

shift leftward further than potential output

not shift far enough rightward

shift rightward further than potential output

not shift far enough leftward

Answer 1

If the government disregards or underestimates the multiplier effect, contractionary fiscal policy could cause aggregate demand to shift leftward further than potential output.