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A reason why discretionary fiscal policy might move the economy away from potential GDP instead of t

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A reason why discretionary fiscal policy might move the economy away from potential GDP instead of t

A reason why discretionary fiscal policy might move the economy away from potential GDP instead of toward potential GDP is that
A) economic forecasts consistently underestimate the impact of fiscal policy.
B) it is difficult to know whether real GDP is above or below potential GDP.
C) during a recession, politicians prefer increases in government spending over decreasing taxes.
D) government programs automatically move real GDP away from potential GDP.
E) government programs are always expansionary.

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Essential Foundations of Economics

Edition: 7^th

Authors: Bade, Parkin

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Start by doing what's necessary; then do what's possible; and suddenly you are doing the impossible.

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Loraine Author

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