The 2008 and 2009 tax cuts and the increase in government spending that occurred at the same time did not have the same inflationary impact as the similar policy in the 1960s because:
A) the fiscal stimulus came at a time when the economy was weakening due to other factors.
B) monetary policymakers, having perceived the inflation risk, responded appropriately.
C) aggregate demand was far below potential output.
D) all of the answers provided are correct.

Question

Quizplus · Accepted Answer

The 2008 and 2009 tax cuts and increase in government spending occurred during a period of economic weakness, with aggregate demand significantly below potential output. Monetary policymakers were also more aware and responsive to inflation risks, employing measures to mitigate these risks. All these factors contributed to a different inflationary impact compared to similar policies in the 1960s.

The 2008 and 2009 Tax Cuts and the Increase in Government