Another problem is that too much government spending

What will be an ideal response?

may lead to inflation. The goal of expansionary fiscal policy is to expand the economic activity to its full-employment level. But what if fiscal policy overshoots this level? It is easy to see how this might occur. For politicians, government spending on popular programs is easy but raising taxes to pay for them is hard. This can lead to budget deficits (discussed in Section 2), but it can also cause excessive aggregate demand in the economy. Excessive demand could also, in theory, arise from high consumer or business spending, but usually government spending, alone or in combination with high consumer and business expenditures, is partly to blame when the economy "overheats." The result is likely to be inflation

Economics

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During recessions, unemployment ________ while the budget deficit as a percentage of GDP ________

A) increases; increases B) decreases; increases C) decreases; decreases D) increases; decreases

Economics

In the long run, real output can be less than, equal to, or greater than the economy's potential output.

a. true b. false

Economics