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
Increasing government spending during a recession does not always lead to higher inflation, as the outcome depends on various factors in the economy. During a recession, there is often high unemployment and unused resources, which means that the economy can absorb more spending without causing prices to rise. For example, if the government invests in infrastructure, it can create jobs and stimulate demand without immediately increasing prices because there is still a lot of spare capacity. However, if the economy is already near full capacity, additional spending may lead to inflation as demand outpaces supply. So, while increased spending can lead to inflation, it is not a guaranteed outcome and depends on the specific economic conditions at the time.
Detailed Explanation
It's not true that more government spending always causes inflation. Other options are incorrect because Many think that any extra spending will always push prices up.
Key Concepts
Fiscal Policy
Economic Recession
Aggregate Demand
Topic
Fiscal Policy in Recessions
Difficulty
medium level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.