Expansionary fiscal policy leads to higher domestic interest rates.

Name: Expansionary fiscal policy leads to higher domestic interest rates.
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Question

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When the government increases spending or cuts taxes to implement expansionary fiscal policy, it increases the demand for goods and services, which can lead to an increase in demand for credit to finance these purchases. As a result, the demand for credit increases, which puts upward pressure on interest rates.

Expansionary Fiscal Policy Leads to Higher Domestic Interest Rates