2
QuizMultiple Choice

Monetary Policy: The Federal Reserve

Question 2 • IL-Economics

What is a potential negative effect of an expansionary policy?

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

Explanation

Expansionary policy boosts spending by making money and credit easier to obtain. If demand rises faster than the economy’s ability to produce goods and services, prices can rise, causing increased inflation. Decreased borrowing and decreased available credit are more associated with restrictive policy.

AI-written and checked against the verified answer.

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