Which of the following is not a weakness of fiscal policy as a tool of economic stabilization?
A)It is ineffective in dealing with stagflation.
B)Its correct implementation depends on an accurate estimate of potential output.
C)It is subject to lags.
D)Households may not respond to changes they perceive as temporary.
E)Households may not respond to changes they perceive as permanent.

Question

Quizplus · Accepted Answer

This statement is incorrect as households are more likely to respond to fiscal policy measures that they perceive as permanent rather than temporary. This is because temporary measures do not create a lasting impact on their disposable income and behavior. The other options are all weaknesses of fiscal policy as a tool of economic stabilization.

Which of the Following Is Not a Weakness of Fiscal