The greatest expansionary impact of a budget deficit will occur when the:
A)government finances the deficit by obtaining newly printed money.
B)government borrows the money from the general public.
C)economy is operating in the intermediate range of its aggregate supply curve.
D)marginal propensity to save for the economy is high.

Question

Quizplus · Accepted Answer

When the government finances the deficit by obtaining newly printed money, it directly increases the money supply, leading to a more significant expansionary impact compared to borrowing from the public, which could crowd out private investment.

The Greatest Expansionary Impact of a Budget Deficit Will Occur