Which Statement Does NOT Represent the Broad Consensus Among Macroeconomists

question 256

Multiple Choice

Which statement does NOT represent the broad consensus among macroeconomists?

• A) Monetary policy should play the main role in stabilization policy.
• B) The central bank should be independent, insulated from political pressures, to avoid a political business cycle.
• C) Discretionary fiscal policy should be used sparingly because of policy lags and the risks of the political business cycle.
• D) Discretionary fiscal policy can lower the natural rate of unemployment.

---

Definitions:

Historical Beta

A measure of a stock's volatility in relation to the market, based on past performance.

Beta

A measure of the volatility, or systemic risk, of a security or a portfolio in comparison to the market as a whole; it indicates the tendency of a security's returns to respond to swings in the market.

CAPM (Capital Asset Pricing Model)

A model used to determine the expected return on an investment based on its level of risk, as well as the risk-free rate of return and the expected market return.

Risk Premium

The extra return expected by an investor for holding a risky asset compared to a risk-free asset, as compensation for the higher risk.