in-response-to-a-recession-a-government-decides-to-increase-infrastructure-spend

Question

In response to a recession, a government decides to increase infrastructure spending and decrease taxes. What is the likely impact on the economy?

Accepted Answer

Increased aggregate demand and economic growth.

Answer

Increased inflation without affecting aggregate demand.

Answer

Decreased aggregate demand and economic contraction.

Answer

Decreased inflation and reduced economic activity.