Why Are Fiscal Tools Sometimes Difficult to Use in Regulating

question 173

Multiple Choice

Why are fiscal tools sometimes difficult to use in regulating the economy?

• A) Decisions on spending and taxation are not solely made on the basis of their potential economic effects.
• B) Federal spending cannot be easily adjusted up or down as economic conditions change.
• C) Decisions by Congress to lower the discount rate to federal banks are a cumbersome process.
• D) Changes in spending and taxes can occur quickly, before many economists can agree on what the problem is.
• E) Decisions about how much government should spend are made by a small group of people.

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Definitions:

Total Revenue

The total amount of money a firm receives from the sale of its goods or services, calculated as the product of price and quantity sold.

Inelastic

A characteristic of goods or services for which demand does not significantly change with a change in price.

Total Revenue

The total amount of money generated from the sale of goods or services by a company before any costs or expenses are deducted.

Inelastic

Describing demand that is relatively unresponsive to price changes, meaning the quantity demanded changes very little when the price changes.