Asked by LaTasha Simmons on May 25, 2024
Verified
Statement I: Fighting inflationary recessions poses a dilemma to macropolicy-makers.
Statement II: A budget deficit,designed to stimulate the economy,necessitates massive Treasury borrowing,driving up interest rates,and ultimately choking off recovery.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
Inflationary Recessions
Economic scenarios characterized by stagnant growth and increasing prices, marking simultaneous occurrences of recession and inflation.
Macropolicy-Makers
These are government officials or agencies responsible for making decisions that affect the economy as a whole, focusing on issues like inflation, unemployment, and economic growth.
Treasury Borrowing
The process by which the government raises funds to finance its expenditures by issuing debt securities, such as bonds and treasury bills.
- Discern the challenges associated with recession periods marked by inflation and strategies for their alleviation.
Verified Answer
HA
Harley ArnoldMay 27, 2024
Final Answer :
C
Explanation :
Statement I is true because fighting inflationary recessions is a complex task that requires a careful balancing act between measures to control inflation and measures to stimulate demand and promote growth. Statement II is also true because a budget deficit created to stimulate the economy can lead to increased borrowing by the Treasury, which might drive up interest rates, making it more expensive for businesses to borrow, invest, and grow, and ultimately hindering recovery. Therefore, both statements are true.
Learning Objectives
- Discern the challenges associated with recession periods marked by inflation and strategies for their alleviation.