Multiple Choice
Which of the following is influenced by personal economic choices?
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0. Basic Principles of Economics
Introduction to Economics
Multiple Choice
Which of the following effects of expansionary government spending would policymakers most want to avoid?
A
A significant increase in inflation
B
A decrease in unemployment
C
A rise in economic growth
D
An increase in aggregate demand
Verified step by step guidance1
Step 1: Understand the context of expansionary government spending, which is a fiscal policy tool used to stimulate economic activity by increasing government expenditures.
Step 2: Recognize the typical effects of expansionary government spending: it tends to increase aggregate demand, which can lead to higher economic growth and lower unemployment.
Step 3: Identify that while increased aggregate demand and economic growth are generally positive outcomes, they can also lead to higher inflation if the economy is near or at full capacity.
Step 4: Analyze why policymakers would want to avoid a significant increase in inflation, as high inflation can erode purchasing power, create uncertainty, and destabilize the economy.
Step 5: Conclude that among the listed effects, a significant increase in inflation is the undesirable outcome policymakers most want to avoid when implementing expansionary government spending.
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