A government encounters a recessionary gap and uses expansionary fiscal policy to correct the problem.It may:
A) find the policy ineffective,especially if the level of public debt is already very high,since additional government borrowing may put pressure on future budgets.
B) find the policy effective if it has to borrow to increase government spending.
C) cause its budget balance to move toward a surplus.
D) decrease the level of public debt in the short run.
Correct Answer:
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A)fiscal policy more effective than
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A)holding everything else constant,
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A)is the change
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