Which of the following is not a weakness of fiscal policy?
A) The implementation of fiscal policy is difficult.
B) Time lags in fiscal policy are long and variable.
C) Fiscal policy works only during periods of stagflation.
D) Fiscal policy often affects only current income, but many economic decisions are made on the basis of permanent income.
E) Fiscal policy might have undesirable long-term effects on short-run aggregate supply.

Question

Quizplus · Accepted Answer

Fiscal policy can be effective in stimulating the economy during periods of both inflation and recession. Therefore, statement C is incorrect as fiscal policy works during both inflation and recession, rather than only during periods of stagflation.

Which of the Following Is Not a Weakness of Fiscal