The potential negative effect of an expansionary policy is increased interest rates.
Expansionary, or free, coverage is a form of macroeconomic coverage that seeks to inspire financial growth. Expansionary coverage can encompass both economic and non-economic coverage.
It is a part of the overall coverage prescription of Keynesian economics, for use at some point in financial slowdowns and recessions, that allows you to slightly mitigate the drawback of financial cycles.
The simple goal of expansionary coverage is to reinforce mixture calls for to make up for shortfalls in non-public calls for.
It is entirely based on Keynesian economic ideas, specifically the idea that the primary cause of recessions is a lack of mixture demand.
Expansionary policy is meant to reinforce enterprise funding and consumer spending with the aid of injecting cash into the financial system either through direct government deficit spending.
Increasing spending and reducing taxes to supply price range deficits means that the authorities are putting extra cash into the financial system than they are taking out.
Therefore, from the above assertion, it's clear that alternative B, increased interest rates , is the right alternative.
Learn more about expansionary policy, refer to:
https://brainly.com/question/13566332
#SPJ2
