Which of the Following Does Not Limit the Effectiveness of Discretionary

question 128

Multiple Choice

Which of the following does not limit the effectiveness of discretionary fiscal policy?

• A)the difficulty of estimating the natural rate of unemployment
• B)time lags involved in enacting appropriate legislation
• C)the difficulty of getting an accurate measure of the rate of inflation
• D)time lags involved in recognizing the need for fiscal policy
• E)the tendency for people to distinguish between temporary and permanent changes in their income

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Definitions:

Cost of Equity

The earnings a firm needs to determine whether an investment satisfies its capital return criteria, commonly utilized in the process of capital budgeting.

Cost of Equity

The return a company is required to generate for its shareholders, often estimated using the Capital Asset Pricing Model (CAPM).

Market Price

The modern-day pricing for buying or selling an asset or service.

Beta

A gauge of the level of variability, or consistent risk, attached to a security or portfolio against the backdrop of the broader market.