suit of lUlht for this outcome? See pages 296-299.) policymaking could thwart th

Question

suit of lUlht for this outcome? See pages 296-299.) policymaking could thwart the efforts of Explain how time lags in discretionary fiscal 13-3. Explain Congress and the president to stabilize real GDP in the of an economic downturn. Is it possible that these time lags could actually cause discretionary fiscal policy to destabilize real GDP? (See page ace o 302.) 13-4. Determine whether each of the following is an example of a situation in which a direct expendi- ture offset to fiscal policy occurs. (See page 300,) a. In an effort to help rejuvenate the nation's rail- road system, a new government agency buys unused track, locomotives, and passenger and freight cars, many of which private companies would otherwise have purchased and put into 13- regular use. MyEconLab Visit http://www.m

Explanation / Answer

Discretionary Fiscal Policy is a policy where the government purposely amends the taxes or the expenditure incurred by them. The application of fiscal policy confronts time lags and policy lags between the onsets of a fiscal problem. Various economic problems, which arise because of this time lag or policy lag, can lead to the contraction of the business-cycle.

If the government reduces the tax, there will be a comparative increase in the economy rather than on expenditure. To boost the expenditure primarily by a certain amount, there is a need for Congress and the President to diminish the taxes by a large amount. Hence, the time wraps will have an unfavorable influence. To maintain a healthy economy, the time lags play a negative role and adversely affect the exertions of the Congress and President.

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