Lags in the Approval and Implementation of Fiscal Policy

question 155

Multiple Choice

Lags in the approval and implementation of fiscal policy

• A)weaken fiscal policy as a tool of economic stabilization
• B)increase the effectiveness of fiscal policy as a tool of economic stabilization
• C)help legislators to better assess what policies are most appropriate to adopt
• D)make fiscal policy more responsive to the current economic environment
• E)cause fiscal policy to be more effective in changing the level of real GDP than changing the price level

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Definitions:

Average Rate Of Return

A method of evaluating a capital investment proposal that focuses on the expected profitability of the investment; computed as average annual income divided by average investment. Also referred to as accounting rate of return.

Average Income

The mean amount of earnings generated over a specified period of time, taking into account all revenue sources.

Cash Payback Method

The cash payback method is a capital budgeting method that estimates the time required for a project to generate cash flows sufficient to recoup the initial investment.

Average Rate Of Return Method

An investment appraisal technique that calculates the expected return of an investment by averaging its annual profits and dividing by its initial cost.