Which of the following statements about fiscal policy is correct?

a. Fiscal policy can help an economy that is producing below its potential GDP to expand aggregate demand so that it produces closer to potential GDP, thus lowering unemployment.
b. Fiscal policy cannot help an economy produce at an output level above potential GDP without causing deflation.
c. Fiscal policy cannot help an economy that is producing below its potential GDP to expand aggregate demand so that it produces closer to potential GDP, thus lowering unemployment.
d. Fiscal policy can help an economy produce at an output level above potential GDP without causing inflation.

ANSWER:

A