Why would most economists default usually first to monetary policy for stabilization before using fiscal policy?
What will be an ideal response?
Monetary policy offers a lot of advantages over fiscal policy. Monetary policy can be implemented faster and central bankers do have independence from political pressure. Fiscal policy is formulated and implemented by politicians who are subject to political pressure and have to please constituents. Also, economists prefer stimulus packages that influence a few key people to do something they were not doing versus policies that pay people to do something they were going to do anyway. Monetary policy is likely to fall in the former category while fiscal the latter.
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If you included both time and entity fixed effects in the regression model which includes a constant, then
A) one of the explanatory variables needs to be excluded to avoid perfect multicollinearity. B) you can use the "before and after" specification even for T > 2. C) you must exclude one of the entity binary variables and one of the time binary variables for the OLS estimator to exist. D) the OLS estimator no longer exists.
When the income elasticity of demand for a good is negative, one can correctly conclude that:
a. the good is a normal good. b. the good is an inferior good. c. the good is a substitute. d. the good is a complement. e. total revenue will decrease when the price increases.
A firm that buys inputs from outside sources is said to ________
a. vertically integrate b. outsource c. create economies of scope d. create hidden characteristics
Discretionary fiscal policy is best described as
A. an automatic change in income transfer payments to keep the economy at full employment. B. a deliberate attempt to improve the functioning of free markets. C. a deliberate action to move the economy toward full employment and price stability more quickly than it might otherwise. D. the design of a tax system that automatically stabilizes economic activity over time.