Large federal budget deficits
A)can best be reduced by automatic stabilizers
B)make it difficult to use discretionary fiscal policy
C)in the mid to late 1980s were the result of a severe recession
D)still constitute only about 1 percent of GDP
E)have little to do with the growth of the federal debt

Question

Quizplus · Accepted Answer

Large federal budget deficits make it difficult to use discretionary fiscal policy because the government may already be spending beyond its means, leaving little room for additional spending or tax cuts to stimulate the economy. This limits the effectiveness of discretionary fiscal policy as a tool for managing the economy.

Large Federal Budget Deficits