Considering the situation described in the ninth question, If the Aggregate Demand (AD) curve shifted to the left, causing short-term equilibrium to be located to the left of the long-run aggregate supply (LRAS), the government can "use expansionary fiscal policy to shift the AD curve to bring the economy back to full employment, but at the cost of a higher price level."
Expansionary Fiscal Policy is a term that is used to describe the government policy that aims at increasing the money supply in the economy.
Given that the Aggregate Demand (AD) curve shifted to the left, the application of expansionary fiscal policy shifted the AD curve to bring the economy back to full employment.
Hence, in this case, it is concluded that expansionary fiscal policy is an excellent policy to employ when the aggregate demand is shifted to the left.
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