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:

Agency

In economics and finance, refers to a relationship where one party, the agent, makes decisions or performs a service on behalf of another, the principal.

Cyclical Unemployment

Unemployment directly related to cycles of economic upturn and downturn.

Structural Unemployment

A form of unemployment caused by a mismatch between the jobs available and the skill levels of the unemployed, often due to technological changes or shifts in the economy.

Frictional Unemployment

Short-term unemployment occurring when individuals are between jobs or are seeking their first jobs.