Which of the Following Statements Is True About Fiscal Policy

question 35

Multiple Choice

Which of the following statements is true about fiscal policy lags?

• A) Automatic stabilizers have a much shorter impact lag than discretionary fiscal policy.
• B) Although the recognition lag is equally long for discretionary fiscal policy and for automatic stabilizers, the latter avoid implementation lag because automatic stabilizers are triggered automatically.
• C) Unlike discretionary fiscal policy, automatic stabilizers respond automatically to changes in the economy, thus avoiding the recognition and implementation lags.
• D) Although automatic stabilizers have a much shorter lag, discretionary fiscal policy instruments have a more potent impact on the economy because they are more precise.

---

Definitions:

Revenues

The income earned from normal business operations and includes discounts and deductions for returned merchandise.

Expenses

Expenses refer to the outflow of money to another person or company to pay for an item or service, or for costs necessary to operate a business.

Owner's Capital

The amount of equity in a company owned by its owner or shareholders, representing the net assets after liabilities have been deducted.

Electronic Repair Revenues

Income generated from services related to fixing and restoring electronic devices and equipment.