By the end of the 1960s,fiscal activism was falling out of favor due to its long ________ lag and,as predicted by the permanent-income hypothesis,the ________ of the 1968 tax surcharge.
A)legislative,ineffectiveness
B)legislative,overstimulation
C)effectiveness,ineffectiveness
D)effectiveness,overstimulation

Question

Quizplus · Accepted Answer

Fiscal activism's decline in popularity was due to the extended time it took for legislative actions to impact the economy (legislative lag) and the ineffectiveness of measures like the 1968 tax surcharge, as anticipated by the permanent-income hypothesis, which suggests that people base their consumption on expected long-term income rather than temporary income changes.

By the End of the 1960s,fiscal Activism Was Falling Out