Which of the following would most likely occur if the federal government increased its spending and enlarged the size of the budget deficit during a period of full employment?
A) The rate of inflation would decline.
B) The rate of inflation would rise.
C) A recession would develop.
D) Interest rates would fall.

Question

Quizplus · Accepted Answer

Increasing government spending during full employment would create an increase in demand for goods and services, causing businesses to raise their prices. This, in turn, would lead to an increase in inflation.

Which of the Following Would Most Likely Occur If the Federal