If the economy is in a recession,the inflation rate is ________ it would be at potential GDP.Other things equal,if the government implemented an expansionary fiscal policy,the inflation rate would ________.
A) greater than; remain constant
B) greater than; decrease
C) less than; increase
D) less than; remain constant

Question

Quizplus · Accepted Answer

When the economy is in a recession, the inflation rate is generally lower than it would be at potential GDP. If the government implemented an expansionary fiscal policy, it would increase aggregate demand in the economy, leading to increased spending and potentially higher prices. Therefore, the inflation rate would increase.

If the Economy Is in a Recession,the Inflation Rate Is