Which of the following would most likely occur if the federal government decreased its spending and reduced 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

When the government reduces its spending during a full employment period, it reduces the demand for goods and services in the economy, which could result in a decrease in prices, leading to a decline in the rate of inflation.

Which of the Following Would Most Likely Occur If the Federal