The coordination problem accompanying expansionary fiscal policy refers to
A) the tendency of increases in government expenditures to expand private sector output by an even larger amount.
B) the possibility that demand stimulus programs will direct resources toward unproductive projects and areas of full employment.
C) the possibility that borrowing to finance current spending will lead to lower future interest rates.
D) the reluctance of Congress to approve increases in government spending during a recession.

Question

Quizplus · Accepted Answer

The coordination problem accompanying expansionary fiscal policy refers to the difficulty of coordinating resources and directing them towards productive projects in a way that maximizes economic growth. This can be particularly challenging during times of economic downturn when there are concerns about unemployment and inadequate demand. In some cases, demand stimulus programs may direct resources towards unproductive projects or areas of full employment, which can exacerbate long-term problems and lead to inefficiencies. This coordination problem is a key concern for policymakers and economists alike, as they seek to balance fiscal stimulus with long-term growth and stability.

The Coordination Problem Accompanying Expansionary Fiscal Policy Refers to