The re-unification of Germany required a large increase in government spending, but the Bundesbank refused to accommodate the expansionary fiscal policy due to concerns about rising inflation.What was the outcome?

Question

Quizplus · Accepted Answer

The outcome of the Bundesbank's refusal to accommodate the expansionary fiscal policy required for the re-unification of Germany, due to concerns about rising inflation, led to several economic consequences. These included rising real interest rates as the demand for funds increased, a deficit in the current account of the balance of payments due to increased imports and potentially decreased competitiveness, an increase in the budget deficit due to higher government spending, and a change in the composition of Germany's GDP as government spending and possibly imports increased.

The Re-Unification of Germany Required a Large Increase in Government