The political business cycle refers to the phenomenon that just before elections, politicians enact - policies. After the elections, the bad effects of these policies (for example, - policies 31) have to be counteracted with

A) contractionary; higher unemployment; expansionary

B) contractionary; a higher inflation rate; expansionary

C) expansionary; higher unemploy ment; contractionary

D) expansionary; a higher inflation rate; contractionary

The political business cycle refers to popular tactics politicians use to secure elections. Politicians tend to spend money or reduce taxes, but this will contract the economy in the future since public income is reduced. Answer D is correct.

Explanation:

These politics are expansionary, due to the goal of spending money in infrastructure and low taxes, for example.

This will appear as a more appealing economy, with more money on people's pockets. However, a contraction will be expected, incrementing interest rates, leading to increased inflationary rates.

Government income will be reduced, and in the long term, a contraction in the economy will be expected. Some paths to deal with this contraction are the increase in taxes and the reduction of investment in public infrastructure, also less banks grating credits due to higher rates.

Based on this logic, answers A and B are incorrect, due to politicians will not contract an economy previous to election time. Answer C is also incorrect indicating and expansion as part of the politics previous to elections, however, the consequence is not unemployment, but higher inflationary rates, leading to a contracting economy. If this contraction is not corrected, however, it will create unemployment as the result of more expensive goods for both people and companies.