Unit 3.6 · Demand Management (Fiscal Policy)
Effectiveness of Fiscal Policy
AO3
Syllabus Requirement
Includes strengths (targeted spending, deep recession effectiveness) and limitations (crowding out, debt sustainability, political constraints, time lags).
Assessment Objectives
AO3Synthesis and Evaluation
Summary
The effectiveness of fiscal policy is evaluated based on its ability to achieve macroeconomic goals like economic growth, low unemployment, and stable inflation. However, various constraints such as political pressures, time lags, and sustainable debt can hinder its effectiveness.