3
lesson pretestMultiple Choice

Pretest

Question 3 • CMS 2026-2027 Economics and Personal Finance CREDIT RECOVERY

What is a potential negative effect of an expansionary policy?

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