As Discussed in the Case in Point on the Size

question 115

Multiple Choice

As discussed in the Case in Point on the size of the fiscal multiplier, a study conducted by Jonathan Parker on the effect of fiscal policy during recessions suggests that

• A) the multiplier effect of fiscal policy is much less than that for monetary policy.
• B) temporary fiscal policy financed through government borrowing implies a multiplier value between 0.8 and 1.5.
• C) fiscal policy has little effect on the economy and that the multiplier value is effectively zero.
• D) statistical models are inadequate to determine the multiplier and the multiplier value likely varies based on the state of the economy.

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Definitions:

Price Elasticity

An indicator showing the reaction of consumer demand for a product to shifts in its price, illustrating how price fluctuations affect buyer sensitivity.

Bumper Crop

is an unusually large harvest of a crop, often due to favorable growing conditions.

Farm Incomes

The earnings obtained from agricultural activities after expenses are deducted.

Crop

A cultivated plant that is grown on a large scale commercially, especially a cereals, fruit, or vegetable.