Which of the following is a problem with discretionary fiscal policy as an economic stabilization tool?
A) Discretionary changes in fiscal policy can be easily anticipated by private decision makers.
B) It is difficult to properly time discretionary changes in fiscal policy.
C) Discretionary fiscal policy is only effective during a recession.
D) Discretionary fiscal policy is only effective during an economic boom.

Question

Quizplus · Accepted Answer

It is difficult to properly time discretionary changes in fiscal policy. Discretionary changes in fiscal policy must be timed correctly in order to be effective, as delays can lead to missed opportunities or exacerbate economic problems. Additionally, making changes too quickly or too frequently can lead to uncertainty and unpredictability, which can harm private decision making and lead to unintended consequences.

Which of the Following Is a Problem with Discretionary Fiscal