A Reason Why Discretionary Fiscal Policy Might Move the Economy

question 4

Multiple Choice

A reason why discretionary fiscal policy might move the economy away from potential GDP instead of toward potential GDP is that

• A) government programs are always expansionary.
• B) during a recession, politicians prefer increases in government spending over decreasing taxes.
• C) government programs automatically move real GDP away from potential GDP.
• D) it is difficult to know whether real GDP is above or below potential GDP.
• E) economic forecasts consistently underestimate the impact of fiscal policy.

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Definitions:

Synchronicity

Synchronicity is a concept introduced by Carl Jung that refers to events that are meaningfully related, yet lacking a causal relationship, suggesting a deeper order in the universe.

Inter-related

Having a mutual or reciprocal relation or connection, where one element affects or depends on another.

Economic Determinism

The theory that economic forces and material interests shape societal structures, values, and practices.

Scientific Method

A systematic procedure for collecting and analyzing evidence crucial in the advancement of science, involving observation, hypothesis formulation, experimentation, and conclusion.