How well fiscal policy works depends on how much the velocity of money can be changed by government tax and spending decisions.

Question

Quizplus · Accepted Answer

Fiscal policy is used by governments to manage the economy by adjusting tax rates and government spending levels. The effectiveness of fiscal policy depends on how much the velocity of money can be changed by these decisions. The velocity of money refers to the rate at which money changes hands within the economy. If government policies can increase the velocity of money, then the overall impact of these policies on the economy will be greater. Therefore, how well fiscal policy works is dependent on the velocity of money.

How Well Fiscal Policy Works Depends on How Much the Velocity