There Are Four Limitations to the Effectiveness of Discretionary Fiscal

question 22

Multiple Choice

There are four limitations to the effectiveness of discretionary fiscal policy. Which item below is NOT one of these limitations?

• A) The fiscal multiplier
• B) The shrinking area of Parliamentary discretion
• C) The legislation time lag
• D) Estimating potential GDP
• E) Errors in economic forecasting

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Definitions:

Money Markets

Financial markets for short-term borrowing and lending, dealing in securities such as Treasury bills and commercial paper.

Investment-Demand

Investment-Demand entails the desire for assets or goods that will provide returns over time, heavily influenced by interest rates, future profit expectations, and economic conditions.

Interest Rate

The part of the loan amount that is levied as interest by the lender on the borrower, often presented as an annual percentage rate of the loan's total value.

Rate of Return

The net gain or loss of an investment over a specified period, expressed as a percentage of the investment's initial cost.