Many economists think discretionary fiscal policy is of limited effectiveness in stabilizing the economy because
1)the multiplier effects associated with fiscal policy take a long time;
2)changes in government spending and taxation are too small in relation to the size of the economy to have much effect;
3)there are long and uncertain lags in implementing fiscal policy.
A)1 only
B)2 only
C)3 only
D)1 and 2
E)1 and 3

Question

Quizplus · Accepted Answer

Discretionary fiscal policy is often considered limited in effectiveness due to the long time it takes for multiplier effects to materialize (1) and the long and uncertain lags in implementing such policies (3).

Many Economists Think Discretionary Fiscal Policy Is of Limited Effectiveness