Examine time lags as a limitation to fiscal policy.
Discretionary fiscal policy is handicapped by A. automatic stabilizers, law−making time lags, and potential GDP estimation. B. automatic stabilizers and induced taxes. C. induced taxes and automatic stabilizers. D. economic forecasting, law minus −making time lags, and induced taxes. E. law minus −making time lags, estimation of potential GDP, and economic forecasting.
Place the fiscal policy timing lags in order from earliest to latest. Not all lags will be used. Earliest lag Latest lag Answer Bank decision lagimplementation lag information lag fiscal lagrecognition lag presidential lag Keynesian lag
The existence of lags in designing and implementing fiscal policy helps illustrate some of the limitations of fiscal policy aimed at easing the burdens of a recession. Which of the following statements best describes a situation when fiscal policy is more appropriate? Fiscal policy favors tax cuts instead of increased government purchases since this removes the legislative lag. The implementation lag is shorter than the recognition and legislative lags. The economy is quick to self-correct but the recession is very...
Practical problems of fiscal policy and its limitation. For example, compare a tax cut to infrastructure spending increase.
To understand the Fiscal Policy Dilemma, you may want to first examine how changes in interest rates, inflation, productivity, and income would affect exchange rates. Then, in this perspective as exchange rates affect Fiscal Policy in an open economy, is a strong U.S. dollar always good for the U.S. and global economies? Why or why not?
Is Fiscal Policy Dead? In recent decades many economists and policy makers had generally agreed that the age of using fiscal policy to control the business cycle had ended. Primarily this was because fiscal policy suffers from more time lags and is politically more difficult in the US compared to monetary policy. During the next contraction, would you recommend using fiscal policy to stimulate the economy or should we rely only on monetary policy tools? Secondly, what laws, rules, etc....
Government's efforts to stabilize the business cycle through fiscal policy can destabilize the economy due to the presence of: lags in the process of crafting a budget appropriate to the circumstances. a negative interaction between fiscal and monetary policy due to the multiplier effect. a tendency of prices to change faster than the interest rate. business cycles that are closely synchronized to the political cycle.
Inside and outside lags: A) What are the inside lag and the outside lag? Explain using an example for each one. B) Which one has longer inside lag: Monetary or fiscal policy? Explain. C) Which one hs longer outside lag: Monetary or fiscal policy? Explain.
Response Questions Part A To D Determine whether each of the following would make fiscal policy more effective or less effective: A decrease in the marginal propensity to consume а. Shorter lags in the effect of fiscal policy b. Consumers suddenly becoming more concerned about permanent income than about current income с. d More accurate measurement of the natural rate of unemployment
What is a contractionary fiscal policy? When would an economy ever pursue a contractionary fiscal policy? When was the last time the US government pursued a contractionary fiscal policy? What did it do? What was the result.