Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
True
B
False
Understanding the Answer
Let's break down why this is correct
Answer
Decreasing government spending can help reduce inflation, but it doesn't always lead to lower inflation in every situation. When the government spends less, there is less money circulating in the economy, which can lower demand for goods and services. This decrease in demand may shift the short-run Phillips curve to the left, indicating lower inflation and unemployment. However, other factors, like global economic conditions or supply chain issues, can also affect inflation, so it’s not a guaranteed outcome. For example, if the government cuts spending but there is a sudden increase in oil prices, inflation could still rise despite the reduced spending.
Detailed Explanation
It's not true that cutting government spending always lowers inflation. Other options are incorrect because Some might think that less government spending always means lower prices.
Key Concepts
Fiscal Policy
Inflation Control
Phillips Curve
Topic
Fiscal Policy and Inflation Control
Difficulty
easy level question
Cognitive Level
understand
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