Topic > Advantages of Fiscal Policy - 1130

Closing out is a disadvantage that must be taken into account. Increased government demand for borrowed funds has the potential to increase interest rates and crowd out those who do not wish to pay higher rates. This can further impact unemployment rates and benefits. Furthermore, as governments use expansionary fiscal policy, there is a notable increase in government spending and budget deficits. According to Weil (2008), “tax policy also changes the burden of future taxes, thus disciplining future taxpayers.” As a result, the government would have to decide whether or not to raise taxes to offset its spending. Another disadvantage that tends to occur is that fiscal policies may not be implemented quickly. This may be due to the delay. The delay occurs because there is a gap between when a fiscal policy is needed and when the president and Congress implement it (Weil, 2008). The government has to decide on the approval of the bill and by the time the bill is passed the issue would have already been resolved. Delays can also be affected by forecasts. If economic activities are not accurately observed, forecasts will not be accurate enough to allow decisions to be made