Discretionary fiscal policy may fail to stabilize the economy or may even make the economy less stable because of:
A) its ineffectiveness.
B) government waste.
C) lags in deciding on and implementing a policy change.
D) the business cycle.

Question

Quizplus · Accepted Answer

Discretionary fiscal policy can take time to be decided upon and implemented, resulting in lags. During this time, the economy may have already shifted and the policy may not have the desired effect or may even destabilize the economy further. Therefore, C is the best choice. A, B, and D are not necessarily true for all cases of discretionary fiscal policy.

Discretionary Fiscal Policy May Fail to Stabilize the Economy or May