Why has discretionary fiscal policy increasingly relied on tax changes rather than on spending as its main tool?
Multiple choice question.
Because tax changes result in a larger savings rate
Because spending is a very effective tool only in conjunction with monetary policy
Because spending is of questionable use in offsetting short periods of recession
Because tax changes result in a larger multiplier effectMultiple Choice Question
Why has discretionary fiscal policy increasingly relied on tax changes rather than on spending as its main tool?
Multiple choice question.
Because tax changes result in a larger savings rate
Because spending is a very effective tool only in conjunction with monetary policy
Because spending is of questionable use in offsetting short periods of recession
Because tax changes result in a larger multiplier effect
1 answer
The correct answer is: Because spending is of questionable use in offsetting short periods of recession.
This reflects the understanding that in situations of short-term economic downturns, tax changes can be implemented more quickly and may be more effective in influencing consumer behavior and stimulating demand compared to government spending, which often has a longer implementation lag.
