A Reason Why Discretionary Fiscal Policy Might Move the Economy

question 204

Multiple Choice

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

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

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Definitions:

Ingroups

social groups with which an individual identifies and feels a sense of belonging, often in contrast to outgroups, which are those perceived as different or outside.

Outgroups

Groups of people that one does not identify with or belong to, often perceived as different or opposed to one's own group (ingroup).

Discrimination

Unfair treatment of a person or group on the basis of prejudice.

Arabs

A linguistic and cultural ethnic group originating from the Arabian Peninsula and neighboring territories, speaking Arabic as their native language.