AD shift to the right
Weaknesses of Demand-Side Policies
  • Time Lags - Demand side policies are useful for getting out of a recession, but by the time the government is able to determine where the country's economy is located, it is too late to fix things.
  • Data lags - The amount of time it takes to gather data on the economy, it can also be too late to fix the problems.
  • Political lags - By the time politicians get through lengthy negotiations, the economy could have changed, and their policies could be ineffective.
  • Implementation lag -The time it takes for money to be printed and spread into the economy, can also be too late.
  • It can cause inflation.
  • "Crowding out" (see above)
  • Can cause a budget deficit - The governement spends money that it does not have and has to borrow money that probably has interest on it.

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