Which does NOT explain when fiscal policy is most likely to matter?
A) when the economy needs a short-run boost even at the expense of the long run
B) when the problem is a deficiency in aggregate demand rather than a real shock
C) when the monetary policy lags behind fiscal policy
D) when many resources are unemployed

Question

Quizplus · Accepted Answer

Fiscal policy is most likely to matter when monetary policy is limited, not lagging. Therefore, option C is the incorrect statement. The remaining options are true statements: fiscal policy is useful when the economy needs a short-run boost (option A), or when there's a deficiency in aggregate demand (option B) or when many resources are unused (option D).

Which Does NOT Explain When Fiscal Policy Is Most Likely