Strengths and weaknesses of budgetary policy

Question 1

Strengths

Answer 1

• Can target specific sectors of the economy
• Effective in stimulating AD during a downturn
• Target a greater range of economic goals than monetary policy
• Automatic stabilisers are effective
• Responsive to the needs of the electorate
• Impact lag is relatively short
• Includes ‘checks and balances’ by parliament
• Open to public scrutiny

Question 2

Weaknesses

Answer 2

SUBJECT TO POLITICAL HURDLES 
PRONE TO POLITICAL BIAS 
IMPLEMENTATION LAG 
RELATIVELY INFLEXIBLE
LESS EFFECTIVE THAN MONETARY POLICY AT RESTRICTING AD DURING A BOOM