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With reference to "Weapons of Mass Distraction", discuss whether fiscal policy is an effective tool to control economic growth.
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With reference to "Weapons of Mass Distraction", discuss whether fiscal policy is an effective tool to control economic growth. Fiscal Policy is the method a government can use to control the trade cycle. Fiscal Policy uses government spending to increase or decrease various parts of aggregate demand. These are shown as AD=C+I+G+(X-M). A major problem with fine-tuning the economy is the time lags that are involved with fiscal policy. These time lags mean that when a fiscal policy change has been put into effect, the results may come at a later period. If the economy is doing well at this period, this could well push the AD curve too close towards AS creating inflation. This means that even though it shows that fiscal policy is an effective tool, it maybe used improperly causing a problem not a solution. However, if fiscal policy is used at the right...
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