An increase in spending by the federal government during the expansion phase of the business cycle would likely lead to what economic outcome?

An increase in spending by the federal government during the expansion phase of the business cycle can lead to an increase in inflation. During this phase, the economy is already growing, often characterized by rising demand for goods and services. When the government injects additional spending into the economy, it can further stimulate this demand.

As the government spends, it usually leads to increased income for businesses and households. This higher income can result in increased consumer spending, putting even more upward pressure on demand. If demand grows significantly and outpaces supply, it can lead to rising prices, hence contributing to inflation.

Moreover, in an expansion phase, resources may already be utilized heavily, so any increase in demand can exacerbate supply constraints, leading to price increases. In this context, the effects of government spending can amplify inflationary pressures as the economy approaches or exceeds its productive capacity.

The other outcomes, such as a decrease in unemployment or decline in consumer spending, might happen but are less directly related to the specific increase in government spending in the context of the economic expansion being discussed. Similarly, while rising interest rates can happen in response to inflation, the primary focus here relates to the direct impact of increased government expenditure during an expansionary phase.