Lags in the approval and implementation of fiscal policy:
A)weaken fiscal policy as a tool of economic stabilization.
B)increase the effectiveness of fiscal policy as a tool of economic stabilization.
C)help legislators better assess what policies are most appropriate to adopt.
D)make fiscal policy more responsive to the current economic environment.
E)cause fiscal policy to be more effective at changing the level of real GDP than changing the price level only in the long run.

Question

Quizplus · Accepted Answer

When fiscal policy is delayed, there may be a lag between the time the policy is implemented and the time it actually affects the economy. This can weaken the effectiveness of fiscal policy as a tool of economic stabilization. If the policy is not implemented until after the economy has already recovered, it may not have any effect at all. Thus, delayed fiscal policy can weaken its ability to stabilize the economy.

Lags in the Approval and Implementation of Fiscal Policy