How might expectations of a fiscal policy being temporary weaken the effects of the policy?How might expectations of a fiscal policy being temporary weaken the effects of the policy?

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litteacher8's profile pic

litteacher8 | High School Teacher | (Level 3) Distinguished Educator

Posted on

When any policy is temporary, it's kind of like having a substitute teacher. No one tries very hard, because the policy is temporary. If you don't know what is going to happen, you have no incentive to follow along.
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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

Let's say the government wants to lower taxes to increase aggregate demand.  Let's say that people are talking about how that will happen in a couple of months.  People might stop spending right now while they wait for the tax cut.  That would lower aggregate demand right now as a reaction to something that is supposed to raise it.

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