According to the Stabilization Policy Video,one Problem with Discretionary Fiscal

question 65

Multiple Choice

According to the Stabilization Policy video,one problem with discretionary fiscal stimulus is that

• A) as you expand the economy, spending on foreign goods increases, thus reducing its impact on domestic output and employment.
• B) consumers and businesses do not expect the policies to work, so they are unprepared to take advantage of the opportunities created.
• C) it works only when monetary authorities reduce the money supply to counter inflation.
• D) the employment created is primarily in government agencies and not in the private sector.
• E) it leads to stabilization in the long run while allowing existing economic hardship to persist indefinitely.

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Definitions:

Perfect Competitor

A theoretical market structure where many firms sell an identical product, entry and exit are easy, and no single firm can influence the market price.

Economic Loss

A loss in financial terms representing the difference between the market value and the cost of production.

Perfect Competitor

A market participant that cannot influence the market price and must take it as given because the market is perfectly competitive.

Short Run

A period in economic theory during which at least one input, such as plant size or the number of firms in the industry, is fixed and cannot be changed.