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The main problems associated with fiscal policy

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Give a brief discussion of six problems that can complicate fiscal policy for policymakers.

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The main problems associated with fiscal policy are all dependent on either the assumptions of the models or practical difficulties in measuring the state of the economy. Some of the most important ones are:

1. The assumption that the government actually knows what the situation is. Fiscal policy is expected to be effective with the assumption that the government knows what is wrong, and has the means to fix it. This may not be the ...

Solution Summary

The main problems associated with fiscal policy are identified.

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