Fiscal policy is especially effective when used to combat real shocks.

Question

Quizplus · Accepted Answer

Fiscal policy, which involves government spending and taxation, is generally more effective in addressing demand-side economic issues rather than real shocks, which affect the supply side of the economy. Real shocks, such as sudden increases in oil prices or natural disasters, often require adjustments in the economy or specific interventions that fiscal policy alone may not effectively address.

Fiscal Policy Is Especially Effective When Used to Combat Real