Question

Using fiscal policy to stabilize the economy is difficult because:a. potential income is known.b. the effects of policy changes is known with certainty.c. there are time lags involved in the use of fiscal policy.d. the size of the government debt doesn't matter.

Answer 1

Using fiscal policy to stabilise the economy is difficult because there are time lags involved in the use of fiscal policy.

Explanation:

Tax policy applies to the implementation of government spending and tax measures, including competition for goods and services, wages, inflation and economic development to affect the dynamics of the economy.

Taxes policy is decisions of the government on investment and taxes. When a government wants to promote economic growth, spending on goods and services must increase. The need for goods and services would then increase. A reduction in government expenditure would reduce the economy's total demand.