Countercyclical Fiscal Policy Is Risky Because

question 133

Multiple Choice

Countercyclical fiscal policy is risky because

• A)it tends to increase the national debt.
• B)real GDP is likely to be close to potential GDP by the time the policy takes effect.
• C)it tends to have no effect on unemployment.
• D)it tends to make recessions more severe.
• E)it tends to result in higher inflation.

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Definitions:

The Dollar

The official currency of the United States, often used as a benchmark in the global economy.

Comparative Advantage

A principle in economics that suggests a country or entity should produce goods and services for which it has a lower opportunity cost, allowing for more efficient international trade.

Bilateral Trade Surpluses

The condition where a country has a positive trade balance (exports exceed imports) with another specific country.

Imposes a Tariff

The action by a government to establish a tax on imported or, occasionally, exported goods.