Procyclical fiscal policies:
A)reduce cyclical fluctuations in the economy, but not as effectively as countercyclical fiscal policies.
B)reduce cyclical fluctuations in the economy more effectively than countercyclical fiscal policies.
C)reduce cyclical fluctuations in the economy about as effectively as countercyclical fiscal policies.
D)increase cyclical fluctuations in the economy.

Question

Quizplus · Accepted Answer

Procyclical fiscal policies tend to increase cyclical fluctuations in the economy rather than reduce them. This is because such policies involve increasing government spending or cutting taxes during economic booms and decreasing spending or increasing taxes during recessions, which amplifies the existing economic cycle.

Procyclical Fiscal Policies