3.6.5—Effectiveness of fiscal policy Topic Practice
3.6.5—Effectiveness of fiscal policy Topic Practice
Students practise evaluating fiscal policy effectiveness by weighing trade-offs like crowding out, time lags, and sustainability against short-run demand management.
How this is tested
- evaluate inflation control against the risk that contractionary policy raises unemployment
- explain crowding out as higher interest rates reducing private investment spending
- assess long-run limits by comparing AD stimulus with supply-side constraints