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Identify and Explain 2 or more possible complications associated to the case of a Fiscal Expansion....

Identify and Explain 2 or more possible complications associated to the case of a Fiscal Expansion. Answer briefly with two paragraphs.

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1) First complication that is associated to Fiscal Expansion is increased budget deficit. Government provides a budget every year that shows the spending and growth forecast of a country. A deficit occurs when the government increases spending beyond the level of incoming revenue. Long-term deficit spending can drain the financial reserves of the government.

2) Another complication that arise out of Fiscal Expansion is expansion that relies on tax cuts. If the government lowers taxes too far, it may not bring in enough yearly revenue to meet its obligations. A revenue shortage impacts the project that are planned to grow the real GDP of a nation. For these reasons, government fiscal expansion is usually used as a short-term strategy, and cannot be used to grow the economy indefinitely.

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