One Drawback in Using Fiscal Policy as a Stabilization Tool

question 28

Multiple Choice

One drawback in using fiscal policy as a stabilization tool is that fiscal policy:

• A)affects potential output as well as planned aggregate expenditure.
• B)effects are frequently offset by automatic stabilizers.
• C)is too flexible to use to close output gaps.
• D)is not useful for dealing with prolonged episodes of recession.

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Definitions:

Sales

The activities involved in selling products or services, often measured by the amount of revenue generated from transactions with customers.

Cost of Goods Sold

An accounting term for the direct costs attributable to the production of the goods sold in a company, including both raw materials and labor expenses.

Aggregate Planning

Strategic planning of overall output levels and resources to effectively meet demand over a period, typically months, considering various constraints and objectives.

Efficiency

The ability to achieve a goal or perform a task with the minimum expenditure of time and resources.