Under Which of the Following Conditions Is Discretionary Fiscal Policy

Multiple Choice

Under which of the following conditions is discretionary fiscal policy most likely to be effective?

A) Economic forecasts are inaccurate.
B) Income tax increases reduce the incentive for effort.
C) Substantial time lags occur before tax cuts affect spending.
D) Crowding out does not occur.
E) Public sector expenditure increases and replaces private sector investment.