What has been the practical effect on macroeconomic policy of the huge U.S.federal budget deficits of the 1980s?
A)The automatic stabilizers no longer functioned.
B)It was tough gaining support to cut taxes or raise government purchases of goods and services during cyclical downturns.
C)Monetary policy has become less useful than fiscal policy because the deficits are so large that they have a greater impact than the money supply.
D)There has been more emphasis on fine-tuning the economy than there was previously.
E)There is now a consensus among economists that a balanced budget amendment should be adopted.

Question

Quizplus · Accepted Answer

The huge U.S. federal budget deficits of the 1980s made it difficult to gain support for cutting taxes or increasing government purchases during cyclical downturns, as politicians were hesitant to exacerbate the deficit further. This limited the effectiveness of fiscal policy as a tool for macroeconomic stabilization.

What Has Been the Practical Effect on Macroeconomic Policy of the Huge