Question

Fiscal stimulus to aid recovery from a recession will be most effective in the long run if______________ it can be reversed as the business cycle approaches the next peak. it begins gradually and increases as the economy approaches full employment. it is accompanied by tight monetary policy from the central bank. the effective fiscal multiplier is low enough to guarantee a strong crowding-out effect.

Answer 1

it can be reversed as the business cycle approaches the next peak.

Step-by-step explanation:

The government should do as Josua stated millenia ago:

save in the seven good years to spend in the seven bad years.

The fiscal stimulus is good when there is no crowingout effect that is, the use of resource from the government do not compite with private demand. hat is true in recession. But; it is precisely what occurs at peak or near full employement. In that scenario the government should decrease their stimulus to aggregate demadn as will only be inflationary