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13 September, 17:26

If expansionary policy produces high GDP and low unemployment, why wouldn't the Fed always use expansionary policy?

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  1. 13 September, 17:33
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    There are limits to how long an expansion is successful.

    Explanation:

    Expansionist policies often lead to fake bubbles of market security where people invest more than they are comfortable with and a small slowdown can cause a market crash as they panic.

    This is because of expansionist policies being used for too long

    These policies are like a turbo get in that they are to be used in moderation because if one relies on them too often they can dis balance the economy by producing a lot of deficit in the reserves and also less governmental control.
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