If the effects of expansionary fiscal policy are delayed by recognition, implementation and impact lags lang enough that the economy has moved to a different stage of the business cycle, then the policy will lead to a budget surplus. the policy will have no effect. the effects could lead to even deeper recession. it may lead to excessive aggregate demand and inflation.
If the effects of expansionary fiscal policy are delayed by recognition, implementation and impact lags lang enough that the economy has moved to a different stage of the business cycle, then the policy will lead to a budget surplus. the policy will have no effect. the effects could lead to even deeper recession. it may lead to excessive aggregate demand and inflation.
Chapter11: Fiscal Policy
Section: Chapter Questions
Problem 2.9P
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If the effects of expansionary fiscal policy are delayed by recognition, implementation and impact lags lang enough that the economy has moved to a different stage of the business cycle, then
the policy will lead to a budget surplus.
the policy will have no effect.
the effects could lead to even deeper recession.
it may lead to excessive aggregate demand and inflation.
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