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One Potential Problem with Using Fiscal Policy to Close Recessionary

Question 72

Multiple Choice

One potential problem with using fiscal policy to close recessionary output gaps is that:


A) sustained government deficits can be harmful to long-run economic growth.
B) decreased government spending can cause inflationary pressure to build.
C) reductions in interest rates can reduce savings and, therefore, investment.
D) it may be offset by automatic stabilizers.

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