Which poses a limit to fiscal policy?
A) crowding out
B) the size of government expenditures
C) legislative lags
D) crowding out,the size of government expenditures,and legislative lags

Question

Quizplus · Accepted Answer

All three options posed in the question- crowding out, size of government expenditures, and legislative lags- limit the effectiveness of fiscal policy. 
Crowding out refers to the situation where government borrowing increases interest rates, leading to a reduction in private investment. This offsets the positive impact of increased government spending. 
The size of government expenditures can limit the scope for further fiscal stimulus, as there is a limit to how much a government can borrow without causing financial instability. 
Finally, legislative lags can delay the implementation of fiscal policies and reduce their effectiveness. Therefore, all three options limit the ability of fiscal policy to stimulate economic growth.

Which Poses a Limit to Fiscal Policy