Which statement is NOT a major limit to the effectiveness of fiscal policy?
A) A single increase in government spending may not be enough to stimulate the economy.
B) The crowding out effect is transmitted through financial markets.
C) Fiscal policy is not very effective in combating supply side shocks.
D) A multiplier effect is associated with changes in spending and taxation.

Question

Quizplus · Accepted Answer

The multiplier effect is actually a mechanism through which fiscal policy can be effective, as it amplifies the impact of government spending or tax changes on the economy.

Which Statement Is NOT a Major Limit to the Effectiveness