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Question:
If expansionary taxation policies are left unchecked, which is the most likely result?
reduced profits
high inflation
reduced production
reduced disposable income
Answer:
The correct answer is: High inflation
Expansionary policy is a fiscal policy that involves the government seeking to increase higher government spending and lowering taxes in order to increase output in the economy because of an increase in aggregate demand.
However, if an expansionary fiscal policy is not kept in check, it could result in the policy being financed by constant printing of money and thus massive inflation will occur.
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