Which Statement Does NOT Represent the Broad Consensus Among Macroeconomists

question 256

Multiple Choice

Which statement does NOT represent the broad consensus among macroeconomists?

• A) Monetary policy should play the main role in stabilization policy.
• B) The central bank should be independent, insulated from political pressures, to avoid a political business cycle.
• C) Discretionary fiscal policy should be used sparingly because of policy lags and the risks of the political business cycle.
• D) Discretionary fiscal policy can lower the natural rate of unemployment.

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Definitions:

Fiscal Policy

Government adjustments to its spending levels and tax rates to influence a nation's economy.

Recession

A period of temporary economic decline during which trade and industrial activities are reduced, generally identified by a fall in GDP in two successive quarters.

TARP Bailout

The Troubled Asset Relief Program, a U.S. government program created in 2008 to purchase toxic assets and inject capital into banks to stabilize the financial system.

Deposit Multiplier

The ratio of the amount of deposits created by banks to the amount of new reserves.