When an economy experiences a negative real shock,fiscal policy:
A) using tax cuts is appropriate.
B) using increased government expenditures is appropriate.
C) is generally not appropriate.
D) is never used by politicians.

Question

Quizplus · Accepted Answer

Fiscal policy may not be effective in addressing a negative real shock because the shock is often caused by external factors such as natural disasters, global economic crises, or changes in international demand or supply. In such cases, fiscal policy may not be able to address these underlying factors and may even worsen the situation by increasing government debt and reducing confidence in the economy. Instead, policymakers may need to consider other policies such as monetary policy or structural reforms to address the negative shock.

When an Economy Experiences a Negative Real Shock,fiscal Policy