What are the limitations in using Fiscal Policy to reduce real GDP to stablize the economy?

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What are the limitations in using Fiscal Policy to reduce real GDP to stablize the economy?

2006-12-07 12:51:45 · 1 answers · asked by nishadlal 1 in Social Science ➔ Economics

1 answers

1. The effect may be depression rather than stabilization. As happened in 1930-32.

2. If the problem is monetary (ie usually, inflation) then the solution must also be monetary. As effectively shown in the US in 1980-82 under Fed Reserve Governor Volcker.

2006-12-09 05:20:05 · answer #1 · answered by MBK 7 · 0⤊ 0⤋