Using Discretionary Fiscal Policy to Smooth the Short-Term Business Cycle

question 301

Multiple Choice

Using discretionary fiscal policy to smooth the short-term business cycle is challenging because:

• A) the data needed are not available for almost a month after the fact.
• B) it often takes up to a quarter to confirm a recessionary phase.
• C) once the policy is decided, it can be implemented immediately.
• D) deciding on fiscal policy often takes a long and contentious legislative process.

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Definitions:

Efficient Market

A market theory suggesting that asset prices fully reflect all available information, making it impossible to consistently achieve higher returns.

Prices

The sum of money anticipated, needed, or provided as compensation for something.

New Information

Fresh data or insights that have not been previously available or considered, commonly impacting financial markets and investment decisions.

Market Efficiency

The degree to which stock prices reflect all available, relevant information, making it impossible to consistently achieve higher returns.