Question

Generally speaking, the government implements fiscal policy in a:

A. fast and accurate manner.
B. slow and inaccurate manner.
C. fast but inaccurate manner.
D. slow but accurate manner.

Answer 1

The government implements fiscal policy in a D. slow but accurate manner due to long and variable time lags.

Step-by-step explanation:

Fiscal policy is implemented by the government through changes in taxation or spending policies in order to influence aggregate demand and aggregate supply.

However, the implementation of fiscal policy can be slow due to long and variable time lags.

These time lags include the recognition lag, legislative lag, and implementation lag, which can take months or even years to complete. Therefore, the government implements fiscal policy in a slow but accurate manner.