Many Economists Think Discretionary Fiscal Policy Is of Limited Effectiveness

Multiple Choice

Many economists think discretionary fiscal policy is of limited effectiveness in stabilizing the economy because
1) the multiplier effects associated with fiscal policy take a long time;
2) changes in government spending and taxation are too small in relation to the size of the economy to have much effect;
3) there are long and uncertain lags in implementing fiscal policy.

A) 1 only
B) 2 only
C) 3 only
D) 1 and 2
E) 1 and 3