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For each of the separate scenarios, discuss the associated shortcoming of fiscal policy: After an increase in government borrowing, interest rate rises and households save more. After an increase in government borrowing to finance spending. households save more as they expect a tax increase in the future. The government has been debating about a policy of tax cut for more than six months. It is expected that the government will not implement the tax cut policy within this year. The government does not know the problems that the economy is experiencing as it takes a lot of time to obtain economic data. A policy of tax increase was implemented 6 months ago. Yet the economy is still having a serious inflation problem. The recession this time is particularly severe and going on for more than a year. The government is still in the process of developing a policy to revive the economy. [Choose] [Choose ] [Choose ] [Choose ] [Choose ] [Choose ] <

For each of the separate scenarios, discuss the associated shortcoming of fiscal policy: After an increase in government borrowing, interest rate rises and households save more. After an increase in government borrowing to finance spending. households save more as they expect a tax increase in the future. The government has been debating about a policy of tax cut for more than six months. It is expected that the government will not implement the tax cut policy within this year. The government does not know the problems that the economy is experiencing as it takes a lot of time to obtain economic data. A policy of tax increase was implemented 6 months ago. Yet the economy is still having a serious inflation problem. The recession this time is particularly severe and going on for more than a year. The government is still in the process of developing a policy to revive the economy. [Choose] [Choose ] [Choose ] [Choose ] [Choose ] [Choose ] <

Exploring Economics
Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter24: Fiscal Policy
Section: Chapter Questions
Problem 5P
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6

choose from the options:

implementation lag

savings shift

recognition lag

crowding lag

impact lag

For each of the separate scenarios, discuss the associated shortcoming of fiscal policy: After an increase in government borrowing, interest rate rises and households save more. After an increase in government borrowing to finance spending, households save more as they expect a tax increase in the future. The government has been debating about a policy of tax cut for more than six months. It is expected that the government will not implement the tax cut policy within this year. The government does not know the problems that the economy is experiencing as it takes a lot of time to obtain economic data. A policy of tax increase was implemented 6 months ago. Yet the economy is still having a serious inflation problem. The recession this time is particularly severe and going on for more than a year. The government is still in the process of developing a policy to revive the economy. [Choose] [Choose ] [Choose ] [Choose ] [Choose ] [Choose ] <
Transcribed Image Text:For each of the separate scenarios, discuss the associated shortcoming of fiscal policy: After an increase in government borrowing, interest rate rises and households save more. After an increase in government borrowing to finance spending, households save more as they expect a tax increase in the future. The government has been debating about a policy of tax cut for more than six months. It is expected that the government will not implement the tax cut policy within this year. The government does not know the problems that the economy is experiencing as it takes a lot of time to obtain economic data. A policy of tax increase was implemented 6 months ago. Yet the economy is still having a serious inflation problem. The recession this time is particularly severe and going on for more than a year. The government is still in the process of developing a policy to revive the economy. [Choose] [Choose ] [Choose ] [Choose ] [Choose ] [Choose ] <
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