In a number of middle to low-income economies around the world, governments may run an expansionary policy of huge and sustained budget deficits. This policy
A. uses the central bank as a mechanism for making loans to politically favored firms.
B. will begin a cycle of heavy reliance on economic growth from a few exported products.
C. counters inflation without regard to the shift to the left in aggregate demand.
D. will shift aggregate demand to the right, so that output is beyond the potential GDP level.
Answer:D
In a number of middle to low-income economies around the world, governments may run an expansionary policy of huge and sustained budget deficits. This policy
A. uses the central bank as a mechanism for making loans to politically favored firms. B. will begin a cycle of heavy reliance on economic growth from a few exported products. C. counters inflation without regard to the shift to the left in aggregate demand. D. will shift aggregate demand to the right, so that output is beyond the potential GDP level.
Explanation: Type: Multiple Choice