Believers in Fixed Rules Maintain That

question 61

Multiple Choice

Believers in fixed rules maintain that

• A)with accurate forecasts, we can see inflation coming at least one year ahead of time.
• B)the length of stabilization lags is not important because fiscal policy actions are taken quickly and the economy feels the effect on aggregate demand quickly.
• C)we should forget about discretionary policy and put the economy on autopilot, relying instead on automatic stabilizers and the economy's self-correcting mechanism.
• D)the economy's self-correcting mechanism is slow and not very reliable, even with automatic stabilizers.

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Definitions:

Amortization of Premium

The gradual recognition in income statements of the excess amount paid over the face value of bonds over the bond's life.

Bonds Payable

Bonds payable refers to the amount a company owes to bondholders and must repay at maturity date, often including regular interest payments.

Accounts Receivable

Outstanding payments from customers to a firm for goods or services that have already been received or utilized but have not yet been settled.

Income Taxes Payable

A liability on a company's balance sheet representing the amount of taxes owed to governmental authorities that have not yet been paid.