Lags in the approval and implementation of fiscal policy
A)weaken fiscal policy as a tool of economic stabilization
B)increase the effectiveness of fiscal policy as a tool of economic stabilization
C)help legislators to better assess what policies are most appropriate to adopt
D)make fiscal policy more responsive to the current economic environment
E)cause fiscal policy to be more effective in changing the level of real GDP than changing the price level

Question

Quizplus · Accepted Answer

Lags in the approval and implementation of fiscal policy can significantly weaken its effectiveness as a tool of economic stabilization. By the time the policy is approved and implemented, the economic situation may have already changed, rendering the policy less effective or even counterproductive. Additionally, significant delays can also create uncertainty and reduce confidence, which can further undermine the effectiveness of fiscal policy.

Lags in the Approval and Implementation of Fiscal Policy