What is one method for measuring the effectiveness of government fiscal policy?

Monitoring national debt levels is a valid method for measuring the effectiveness of government fiscal policy because it provides insight into how government spending and taxation impact the economy over time. When a government implements fiscal policy, such as increasing public spending or altering tax rates, these actions directly influence the budget balance, which in turn affects the level of national debt.

If fiscal policy is effective, it can stimulate economic growth, leading to increased tax revenue without raising tax rates, which could stabilize or reduce national debt levels relative to GDP. Conversely, if fiscal measures result in higher national debt without corresponding economic growth, it might indicate inefficiencies or issues within the fiscal approach being taken. This method thus serves as a key indicator of whether fiscal policies are fostering a sustainable economic environment or leading to potential long-term financial burdens.

Monitoring national debt provides a broader picture of the fiscal health of a country and reflects the long-term outcomes of fiscal policy in terms of economic growth, sustainability, and the government's fiscal position.