If increases in government spending lead to inflation, the value of the multiplier is reduced.

Name: If increases in government spending lead to inflation, the value of the multiplier is reduced.
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This is because higher government spending increases aggregate demand, which leads to an increase in prices. As a result, the value of the multiplier decreases because each additional dollar of government spending generates less additional output due to inflationary pressures.

If Increases in Government Spending Lead to Inflation, the Value