Fiscal Policy Is Likely to Fail to Correct Stagflation in an Economy

question 86

Multiple Choice

Fiscal policy is likely to fail to correct stagflation in an economy because:

• A)it affects both aggregate demand and supply,although only aggregate supply needs to be changed.
• B)it affects both the aggregate demand and supply,although only aggregate demand needs to be changed.
• C)it affects aggregate demand only,although aggregate supply needs to changed.
• D)it affects aggregate supply only,although only aggregate demand needs to be changed.
• E)it affects either aggregate demand or aggregate supply,although both need to be changed simultaneously.

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Definitions:

Capital Cost Allowance (CCA)

A tax deduction in Canada for depreciable property expense, used to decrease taxable income.

Salvage Value

The anticipated market value of an asset once it reaches the end of its operational lifespan.

Discount Rate

The interest rate used to discount future cash flows to their present value, often used in capital budgeting and investment valuation.

Earnings Before Interest And Taxes (EBIT)

A measure of a firm's profit that includes all incomes and expenses except interest and income tax expenses.