Political business cycles result from _____
A) a contractionary monetary policy.
B) an expansionary fiscal policy.
C) an expansionary monetary policy.
D) tax increases on high-income households.
E) automatic stabilizers to control demand.

Question

Quizplus · Accepted Answer

Political business cycles occur when politicians manipulate fiscal policy (taxation and government spending) to stimulate the economy just prior to an election in order to improve their chances of being re-elected. This means implementing expansionary fiscal policies (such as increasing government spending and/or lowering taxes), which increases aggregate demand and economic growth in the short run.

Political Business Cycles Result from _____