Two Drawbacks in Using Fiscal Policy as a Stabilization Tool

question 62

Multiple Choice

Two drawbacks in using fiscal policy as a stabilization tool are that fiscal policy can affect ________ as well as aggregate demand and that fiscal policy is ________.

• A)consumption; too flexible
• B)potential output; not flexible enough
• C)consumption; offset by automatic stabilizers
• D)potential output; offset by automatic stabilizers

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