One Advantage of Automatic fiScal Policy Over Discretionary fiScal Policy

question 331

Multiple Choice

One advantage of automatic fiscal policy over discretionary fiscal policy is that automatic fiscal policy

• A) makes the actual budget a better reflection of the condition of the economy than the standardized budget.
• B) does not produce a cyclical deficit, as discretionary policy does.
• C) is not subject to the timing problems of discretionary policy.
• D) has a greater multiplier effect than discretionary policy.

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Definitions:

Interest Rate

The cost of borrowing money or the return on invested funds, typically expressed as a percentage.

Present Value

The immediate worth of a future lump sum or successive cash inflows, considering a specific return rate.

Future Sum

The projected amount of money or value at a specific future date, usually factoring in variables such as interest rates and time periods.

Loan

A sum of money borrowed by one party from another, subject to repayment of the principal amount with interest.