Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It typically lowers inflation by reducing demand.
B
It generally raises inflation by increasing overall demand.
C
It has no effect on inflation.
D
It decreases inflation by increasing taxes.
Understanding the Answer
Let's break down why this is correct
Answer
Increased government spending can influence inflation control in an economy by boosting demand for goods and services. When the government spends more, it can create jobs and increase income for people, which leads to higher consumer spending. This higher demand can sometimes cause prices to rise, resulting in inflation. For example, if the government builds new schools and hires teachers, more people will have money to spend, which might push prices up if the supply of goods doesn't keep up. Therefore, while government spending can stimulate the economy, it also needs to be balanced to avoid excessive inflation.
Detailed Explanation
When the government spends more money, it puts more cash into the economy. Other options are incorrect because Some might think that spending less can lower prices; It's a common belief that spending has no effect.
Key Concepts
Government spending
Topic
Fiscal Policy and Inflation Control
Difficulty
easy level question
Cognitive Level
understand
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