Respuesta :
Formulation lag, Information lag and Implementation lag might have caused the federal government pursues an expansionary fiscal policy.
What effects does fiscal expansion have on the economy?
Expansionary fiscal policy is employed to stop or avert recessions as well as to lower unemployment rates. In an effort to increase consumer spending, the Economic Stimulus Act of 2008 empowered the government to put money directly into consumers' pockets.
However, if implemented during sound economic booms, expansionary fiscal policy can lead to higher interest rates, expanding trade deficits, and increasing inflation. The government must widen its deficit and take on debt in order to support fiscal stimulus, which can be achieved by either raising expenditure or lowering tax collection. This may cause interest rates to rise, which would then cause investment to decline.
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Suppose the federal government pursues an expansionary fiscal policy. By the time the fiscal policy's effects actually reach the economy, it has already corrected itself. What might have caused this? Select all that apply.
a) Formulation lag
b) Information lag
c) Crowding out
d) Implementation lag
e) Monetary lag
