Question

Would fiscal policymakers ever have reason to worry about potentially inflationary conditions? Why or why not?

Short answer

Fiscal policymakers must be concerned about inflation.

Step-by-step solution

Introduction

Inflation is defined as a condition in which the price of all goods and services begins to rise, reducing people's real purchasing power.

Explanation

Yes, fiscal planners must be concerned about inflation since rising inflation will raise people's expectations for treasury securities returns. They will not invest in them otherwise.

To raise funds, the government requires more people to invest in their securities. During the inflationary period, the government must provide greater returns to attract capital, raising the project's cost.

As a result, fiscal policymakers must be concerned about inflation.