Once either expansionary or contractionary fiscal policy has been undertaken,
A) aggregate demand will respond quickly and the problems in the economy will be corrected.
B) aggregate demand will respond quickly in the short run but the economy will not improve in the long-run.
C) a time lag exists between implementation and the results of the policy.
D) taxes will need to be adjusted because of the recognition time lag.

Question

Quizplus · Accepted Answer

There is a time lag between when fiscal policy is implemented and when it is effective in changing aggregate demand. Therefore, the effects of fiscal policy may not be felt until some time after its implementation.

Once Either Expansionary or Contractionary Fiscal Policy Has Been Undertaken