One of the Shortcomings of Fiscal Policy Is That

question 58

Multiple Choice

One of the shortcomings of fiscal policy is that:

• A) it has significant time lags, which make it more effective.
• B) it takes effect immediately, so it is the best policy to use in an economic crisis.
• C) it affects aggregate demand indirectly through the interest rate.
• D) it has time lags, so sometimes it may end up destabilizing the economy.

---

Definitions:

Cost Formula

A mathematical equation or method used to calculate the total cost of production or service, considering both variable and fixed expenses.

Activity Levels

The degree of operations or production volume within a specific period, affecting costs and decision-making in businesses.

Variable Cost

Costs that fluctuate in direct proportion to production or sales figures, including items like direct labor and raw materials.

Mixed Costs

Expenses comprising both fixed and variable components, changing in total with the level of activity but not proportionately.