What are political business cycles and how could they be created?
What will be an ideal response?
Political business cycles are fluctuations in GDP as a result of political action. It is argued that politicians cause these cycles. During election years, politicians promote expansionary economic policies because having a strong economy during a reelection period improves politicians’ chances for reelection. Once they are reelected, politicians implement contraction fiscal policy to deal with the inflationary effects of the expansionary policy they had previously implemented. Essentially, political business cycles result because politicians use fiscal policy for their political needs.
You might also like to view...
If you shop for a car online and compare car prices across dealerships, money is functioning as a
A) means of payment. B) medium of exchange. C) barter mechanism. D) store of value. E) unit of account.
With an increase in the capital stock, the short-run aggregate supply curve
A) remains as it is. B) shifts rightward. C) shifts leftward. D) becomes steeper.