If the economy is experiencing excess demand that is causing inflation,the inflationary pressures can be eliminated by reducing government spending by less than the amount of excess demand.

Question

Quizplus · Accepted Answer

By reducing government spending by less than the amount of excess demand, it will lead to a decrease in the overall demand in the economy, which in turn will help to reduce inflationary pressures. This is because the overall demand will be reduced by a smaller amount than the excess demand, allowing some level of equilibrium to be reached, and avoiding excessive deflation.

If the Economy Is Experiencing Excess Demand That Is Causing