Explanation Keynesian economists believe that higher government spending financed through borrowing (enlarged budget deficit) and lower tax rate increases the aggregate demand which recovers the economy from recession. They also argued that the multiplier effect of government spending than reduction in tax rate. Even though, the theory is not free from limitations. An appropriate timing of fiscal policy is needed for attain economic stability. If the policy is implemented incorrectly, it may do harm rather than good...

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN: 9781305506756

Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher: Cengage Learning

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Unemployment and Cost of Unemployment

Unemployment is the state of being unemployed, even when an individual is actively seeking work opportunities. The unemployment rate refers to the percentage of the workforce that is currently unemployed.

Question

Chapter 12, Problem 13CQ

To determine

Limitations of fiscal policy.

Expert Solution & Answer

Chapter 12 Solutions

Macroeconomics: Private and Public Choice (MindTap Course List)

Ch. 12 - Prob. 1CQ Ch. 12 - Prob. 2CQ Ch. 12 - Prob. 3CQ Ch. 12 - Prob. 4CQ Ch. 12 - Prob. 5CQ Ch. 12 - Prob. 6CQ Ch. 12 - Prob. 7CQ Ch. 12 - Prob. 8CQ Ch. 12 - Prob. 9CQ Ch. 12 - Prob. 10CQ

Ch. 12 - Prob. 11CQ Ch. 12 - Prob. 12CQ Ch. 12 - Prob. 13CQ Ch. 12 - Prob. 14CQ

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