Moderate deficits,such as those experienced by the United States in the last decade,present an inflationary problem if

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Moderate deficits can put upward pressure on interest rates as the government competes with the private sector for borrowing, increasing demand for credit. Inflationary pressures may arise if the Fed accommodates these pressures by maintaining low-interest rates, increasing the money supply, and stimulating aggregate demand. As a result, the Fed's goal of preventing high interest rates may be in conflict with managing inflationary pressures.

Moderate Deficits,such as Those Experienced by the United States in the Last