Which of the following about fiscal policy is true?
A) Modern forecasting methods make it relatively easy to time fiscal policy changes in a manner that will help stabilize the economy.
B) Legislative action is necessary if automatic stabilizers are going to smooth the ups and downs of the business cycle.
C) Proper timing of changes in discretionary fiscal policy is both crucially important and difficult to achieve.
D) Both the crowding-out and new classical theories indicate that expansionary fiscal policy will exert a powerful impact on aggregate demand.

Question

Quizplus · Accepted Answer

Proper timing of changes in discretionary fiscal policy is crucially important because it can help stabilize the economy, but it is difficult to achieve due to delays in recognizing economic conditions, implementing policy, and the time it takes for the policy to have an effect.

Which of the Following About Fiscal Policy Is True