A Problem with the Use of Aggregate Demand Management to Stabilize

question 53

Multiple Choice

A problem with the use of aggregate demand management to stabilize the business cycle is that

• A)monetary policy isn't available to use when interest rates are already rising because of higher inflation.
• B)fiscal policy takes a long time to have any impact on the economy.
• C)monetary policy is difficult to use, because the decision-making process is long and complicated.
• D)the precise amount that output will change in response to monetary or fiscal policy isn't known.

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Definitions:

Current Liabilities

Short-term financial obligations that are due within one year or within the normal operating cycle of the business.

Debt-To-Equity Ratio

A metric that shows the balance between the amount of a company's assets financed by owners' equity and that financed by debt.

Working Capital

Working capital represents a company's operating liquidity and is calculated as current assets minus current liabilities.

Long-Term Assets

Assets that a company plans to hold for more than one fiscal year, such as buildings, land, and equipment.