The Limits of Fiscal Policy

What are the three key characteristics of an ideal fiscal stimulus?

• Permanent, broad, and immediate

• Timely, targeted, and temporary

• Large, legislative, and long-term

• Recognized, implemented, and effective

Which of the following is NOT a type of lag associated with the implementation of fiscal policy?

• Recognition lag

• Legislative lag

• Technological lag

• Effectiveness lag

Which of the following is an example of an automatic stabilizer in fiscal policy?

• Government contracts for new infrastructure projects

• Changes in tax rates based on economic performance

• Direct cash payments to all citizens

• New laws passed to create jobs

What approximate percentage of the US government's budget is typically considered non-negotiable spending, including items like Social Security and national defense?

• 20%

• 40%

• 65%

• 80%