Answer
Policyholders have the difficulty of deciding how much to change the money supply, government spending, and taxes since each of these actions can have a different effect on the economy.
Work Step by Step
Government spending can boost aggregate demand, but the increased government spending would also boost the amount of taxes the government would need to raise to cover the additional spending.
Depending on whether the tax cut is temporary or permanent, this can decide whether consumers are more apt to save or spend the tax cut.
