Statement I: Fighting inflationary recessions poses a dilemma to macropolicy-makers.
Statement II: A budget deficit,designed to stimulate the economy,necessitates massive Treasury borrowing,driving up interest rates,and ultimately choking off recovery.

Question

Quizplus · Accepted Answer

Statement I is true because fighting inflationary recessions is a complex task that requires a careful balancing act between measures to control inflation and measures to stimulate demand and promote growth. Statement II is also true because a budget deficit created to stimulate the economy can lead to increased borrowing by the Treasury, which might drive up interest rates, making it more expensive for businesses to borrow, invest, and grow, and ultimately hindering recovery. Therefore, both statements are true.

Statement I: Fighting Inflationary Recessions Poses a Dilemma to Macropolicy-Makers