Which of the Following Is NOT a Major Limit to the Effectiveness

question 91

Multiple Choice

Which of the following is NOT a major limit to the effectiveness of fiscal policy?

• A) A single increase in government spending is rarely enough to stimulate the economy.
• B) The crowding out effect is transmitted through financial markets.
• C) Fiscal policy is not very effective in combating supply side shocks.
• D) A multiplier effect is associated with changes in spending and taxation.

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Definitions:

Indirect Costs

Expenses not directly tied to the production of goods or services, such as overhead costs for administration, facilities, and security.

Cost Object

Anything for which a separate measurement of costs is desired, such as products, services, projects, or departments.

Variable Costs

Expenses that fluctuate with the level of production or sales volume, such as raw materials and direct labor.

Direct Costs

Expenses that can be directly traced to the production of a specific good or service, such as raw materials and direct labor.