Which of the following is a problem with discretionary fiscal policy as an economic stabilization tool?

a. Discretionary changes in fiscal policy can be easily anticipated by private decision makers.
b. It is difficult to properly time discretionary changes in fiscal policy.
c. Discretionary fiscal policy is only effective during a recession.
d. Discretionary fiscal policy is only effective during an economic boom.

ANSWER:

b. It is difficult to properly time discretionary changes in fiscal policy.