Limitations of fiscal policy to manipulate aggregate demand
- Created by: Stewie Griffin
- Created on: 15-10-13 09:28
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- Limitations of fiscal policy to manipualte aggregate demand
- Time lags
- Any increase in government spending takes time to implement
- Inadequacy of economic data
- Active fiscal policy assumes that there is knowledge of the state of the economy if this not true the policy could be used at the wrong time
- Inadequate economic knowledge
- Nobody knows how the economy will behave
- National debt
- Borrowing has become an increasing problem
- Golden rule in the UK
- States that the governemnt will only borrow to invest
- Sustainable investment rule in the UK
- States that the national debt will be kept at or below 40% of GDP
- Time lags
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