Asked by Jacob Willard on Jun 07, 2024

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One of the potential economic problems associated with the extensive use of macropolicy to recover from the Great Recession is

A) the huge government deficits and the flood of money into the banks could set off an inflationary spiral.
B) the large amount of government spending for job creation could result in rapid and uncontrollable increases in wages.
C) the flood of money into the banks could cause excessive investment expenditures in the economy.
D) the tax rebates made available to consumers could cause uncontrollable increases in the price of housing.

Inflationary Spiral

A situation where prices increase continually as demand outstrips supply, often leading to rapidly increasing inflation.

Macropolicy

Strategies and interventions by the government to regulate and control the economy as a whole, affecting macroeconomic variables such as inflation, unemployment, and national income.

Great Recession

The Great Recession refers to the global economic downturn that occurred from 2007 to 2009, marked by significant financial crises, high unemployment, and contraction in the world economy.

  • Comprehend the effect of monetary and fiscal strategies on aggregate demand levels.
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Abigail DuranJun 10, 2024
Final Answer :
A
Explanation :
The extensive use of macropolicy, such as government deficits and flooding money into banks, could potentially lead to an inflationary spiral. When there is too much money in circulation, it can lead to an increase in demand for goods and services, which can then lead to price increases. This is especially true if there are supply-side constraints in the economy, such as limited resources or the inability to increase production quickly enough. To combat inflation, the government may have to raise interest rates, which can slow economic growth and potentially cause a recession.