Which statement best describes the likely effects of an expansionary fiscal policy?

Expansionary fiscal policy increases government spending or cuts taxes, raising total demand in the economy. The greater demand can encourage businesses to hire more workers, reducing unemployment, and can push prices upward, increasing inflation. It may also raise interest rates as borrowing demand increases, but among these choices, reducing unemployment while increasing inflation is the best description: “It can reduce interest rates and unemployment, but increase inflation.”

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