Since fiscal policy can be manipulated by partisan political interests:
A) the political business cycle may drive the economic business cycle.
B) we may see lower interest rates before elections and higher interest rates after elections.
C) the economic business cycle may lead the political business cycle.
D) we may see lower inflation and higher unemployment before elections.

Question

Quizplus · Accepted Answer

Fiscal policy, being subject to the decisions of politicians, may be influenced by their desire to win elections or gain political power. This can result in the political business cycle driving the economic business cycle, with policies enacted to boost the economy before an election and tighter policies implemented afterward.

Since Fiscal Policy Can Be Manipulated by Partisan Political Interests