Why is fiscal policy so difficult?

How does fiscal policy work and which dimensions have to be considered? In this short text, you can learn about the difficulty of juggling the different dimensions and challenges of fiscal policy and whether optimal rules exist at the micro and macro level or not.

The three main dimensions that make fiscal policy difficult are 1. the real funding needs of the state, 2. the macroeconomic state of the economy and 3. the financial circuit.  Furthermore, this material provides a short part on the terminology and analytical toolbox needed to discuss and understand fiscal policy dilemmas correctly. 

 

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