Question

In what way is fiscal policy limited in practice?

	Fiscal policy is limited by legislative delay.
	Fiscal policy is limited by implementation delay.
	Fiscal policy is limited by economic data being released with a lag.
	Fiscal policy is limited by the liquidity trap.
	Fiscal policy is limited by banks not loaning out excess reserves.
	Fiscal policy is limited by investment spending crowding out government revenue.

Answer 1

--> answer is all options are correct.

-->Fiscal policy means government carrying out activities related to taxes and spendings to maintain the economy. When government adopts expansionary fiscal policy, it reduces taxes and increases spendings. When government adopts contractionary fiscal policy,it will reeuce spendings and increases taxes.

---> Although fiscal policy is used often by every government, it has its own limitations such as administrative delays, legislative delays, wrong forecasts, crowding out private investment, high debt obligations etc.