The use of discretionary fiscal policy to end a recession is limited because
A) in the real world, taxes are not induced.
B) the legislative process is slow.
C) the real-world multiplier is too small to have an impact on real GDP.
D) potential GDP changes too rapidly.

Question

Quizplus · Accepted Answer

The legislative process for implementing discretionary fiscal policy is slow, which means that it can take a significant amount of time for any changes to take effect. This can make it difficult to use fiscal policy as a tool to quickly end a recession. Additionally, even if the legislative process were faster, there are other limitations to discretionary fiscal policy, such as difficulty in accurately predicting the size of the multiplier and potential unintended consequences of government intervention.

The Use of Discretionary Fiscal Policy to End a Recession