Answer to Question #214483 in Microeconomics for Mulweli

Question

The spread of COVIC-19 across all countries of the world resulted in resorting to various forms of
lockdown measures. The locks down measures crippled many economies including the South African
Economy. To resuscitate these economies, there is renewed interest in fiscal policy as a tool
macroeconomic policy. Critically discuss the shortcomings of anti-cyclical policy

Answer 1

Shortcomings of anti-cyclical policy

-When governments try to fight inflation with anti-cyclical policies, they risk reacting to the macroeconomic circumstances two or three years ago in a way that was completely inappropriate for the sector at the moment

-If the state lacks data anti-cyclical policy will suffer e. g. If the government feels there will be a crisis, they will raise Ads; but, if this prognosis is incorrect and the economy grows too quickly, the government's actions will result in inflation.

- Politics and voter appeasement can impact it, resulting in poor judgments that are not based on information or economic theory. If monetary policy is not linked with government-enacted fiscal policy, it can sabotage efforts.