Which of the Following Factors Substantially Reduces the Effectiveness of Discretionary

question 100

Multiple Choice

Which of the following factors substantially reduces the effectiveness of discretionary changes in tax rates or government expenditures as a stabilization tool?

• A) Even though computer models have enhanced our forecasting ability, policy makers at the Federal Reserve have been reluctant to utilize information supplied by the models.
• B) When fiscal policy is altered, the Fed generally shifts monetary policy in a manner that offsets the impact of the fiscal action.
• C) Changes in government expenditures and taxes are always offset by equal changes in private spending.
• D) Since it takes time for fiscal policy to work and since the future is difficult to forecast, it is difficult to time fiscal policy changes correctly.

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Definitions:

Rightness

The quality or state of being morally correct or justified.

Capabilities Approach

A normative framework that evaluates social arrangements and public policies based on their ability to enable individuals to achieve functionings that they have reason to value.

Martha Nussbaum

A contemporary philosopher and academic who has contributed significantly to political philosophy, ethics, and the understanding of human emotions.

Ethics

The branch of philosophy that deals with questions about morality, including the formulation, justification, and recommendation of concepts of right and wrong behavior.