If expansionary taxation policies are left unchecked, which is the most likely result?

reduced profits
high inflation
reduced production
reduced disposable income

The correct answer is: High inflation
An expansionary fiscal policy is a policy where the government increases spending and lowers taxes in order to expand the economy. However, if this policy is not kept in check, it could lead to high inflation. This is because if the policy is not paid for by increased revenue, it will have to be financed by printing more money.

And when there is too much money in the economy, prices will go up as people try to spend it all before it loses value. So if you’re considering an expansionary fiscal policy, make sure you can rein it in before inflation gets out of control!


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