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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pohnpei397 eNotes educator| Certified Educator

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.

litteacher8 eNotes educator| Certified Educator
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.