Which of the Following Are Reasons Why Monetarists Oppose Activist

question 1

Multiple Choice

Which of the following are reasons why monetarists oppose activist stabilization policies?
I. Monetary policy lags are so long and variable that trying to stabilize the economy using
Monetary policy can be destabilizing.
II. Monetary policy affects a nation's currency exchange rate and affects the nation's competitiveness in the global market.
III. Because of crowding-out effects, fiscal policy has no effect on GDP.
IV. Fiscal policies must be financed by government borrowing or tax increases, both of which affect aggregate demand negatively.

• A) I only
• B) I and II only
• C) I and III only
• D) I, II, III, and IV

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Definitions:

Transactions Balance

The amount of money held to facilitate day-to-day financial transactions, reflecting the liquidity needed for regular expenditures.

Loan Requirement

A set of criteria established by lenders that a borrower must meet to qualify for a loan.

Accruals

The accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.

Working Capital

Current assets minus current liabilities, indicating the short-term liquidity of a company and its ability to pay off its obligations.