Question

Fiscal policy would be more effective if: a. crowding out occurred more often. b. the government could change taxes and expenditures rapidly. c. the size of the government debt didn't matter. d. potential income was unknown.

Answer 1

Answer:

B) the government could change taxes and expenditures rapidly.

Explanation:

Fiscal policy is the government's spending and taxation policies carried out to influence the country's economy. The government can carry out an expansionary fiscal policy by reducing taxes or increasing spending to try to boost the economy, or it can carry out a contractionary fiscal policy that increases taxes and reduces spending to try to cool down the economy.

Expansionary fiscal policies are carried out to try to increase total aggregate demand, but it also increases the government's deficit and national debt. The main gals of fiscal policy should be to lower unemployment rate and achieve a sustainable economic growth.