One Drawback in Using Fiscal Policy as a Stabilization Tool

question 139

Multiple Choice

One drawback in using fiscal policy as a stabilization tool is that

• A) it does not affect potential output in addition to planned aggregate expenditure.
• B) its effects are frequently offset by automatic stabilizers.
• C) it is not always flexible enough to use to close output gaps.
• D) it is not useful for dealing with prolonged episodes of recession.
• E) it does not affect planned aggregate expenditurE.

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