5
QuizMultiple Choice

Monetary Policy: The Federal Reserve — Quiz

Question 5 • Economics

What is a potential negative effect of an expansionary policy?

Answer
A
increased interest rates
B
decreased available credit
C
increased inflation
D
decreased borrowing

Explanation

Expansionary policy increases spending and demand in the economy, often by making borrowing easier or increasing the money supply. If demand grows faster than the economy’s ability to produce goods and services, prices can rise, causing inflation. So a potential negative effect is increased inflation.

AI-written and checked against the verified answer.

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