41
QuizMultiple Choice

Fiscal Policy: Spending — Quiz

Question 41 • Economics

Which of these effects of expansionary spending would a government most want to avoid?

Answer
A
higher inflation
B
growth in consumer spending
C
growth in production
D
higher employment

Explanation

Expansionary government spending increases demand for goods and services, which can boost production, employment, and consumer spending. If demand rises faster than the economy’s ability to produce, however, prices may rise broadly. A government would generally want to avoid higher inflation because it reduces purchasing power and makes costs less predictable.

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