Because Monetary and Fiscal Lags Are Long and Variable

question 97

Multiple Choice

Because monetary and fiscal lags are long and variable:

• A) stronger policies must be used.
• B) successful stabilization policy is completely impossible.
• C) attempts to stabilize the economy are often destabilizing.
• D) policy must be completely passive.

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Definitions:

Government Spending

Expenditures made by the government of a country on collective needs and wants such as infrastructure, public safety, education, and healthcare.

Public Debt

Money that is owed by a government to creditors within the country or externally, arising from borrowing to finance expenditures exceeding tax revenues.

Budget Deficits

The amount by which government spending exceeds its revenue over a specified period, leading to a need for borrowing or currency printing.

Federal Budget Deficit

The shortfall when a government's total expenditures exceed its total revenue for a specific fiscal period, leading to borrowing or the depletion of reserves.