Government's efforts to stabilize the business cycle through fiscal policy can destabilize the economy due to

Question

Government's efforts to stabilize the business cycle through fiscal policy can destabilize the economy due to the presence of .

lags in the process of crafting a budget appropriate to the circumstances

a negative interaction between fiscal and monetary policy due to the multiplier effect

a tendency of prices to change faster than the interest rate

business cycles that are closely synchronized to the political cycle

Answer 1

Is this multiple choice? There are a few differnet answers...

Lags mean expansionary policy might not take effect until the problem has 'solved itself.

Increased government spending can cause money demand to rise, increasing interest rates and cancelling out the hoped expansion.

The price/interest rate thing is the worst answer.

Poltical cycles might cause governments to embark on unneeded policy as a political expediency to try to "buy votes".

Hope this helps!