One potential problem with using fiscal policy to close recessionary output gaps is that:
A. sustained government deficits can be harmful to long-run economic growth.
B. it may be offset by automatic stabilizers.
C. decreased government spending can cause inflationary pressure to build.
D. reductions in interest rates can reduce savings and, therefore, investment.
Answer: A
You might also like to view...
Futures markets and derivatives contribute to economic growth by:
A. increasing the risk-taking capacity of the economy. B. deterring the transfer of risk. C. decreasing speculation. D. forcing people to accept the risk their decisions create.
Which of the following is NOT a macroeconomic statement?
A) The U.S. inflation rate was two percent in 2016. B) The price of cell phones decreased by 18 percent last year. C) Gross domestic product in Peru increased 4 percent from 2015 to 2016. D) Aggregate worker productivity decreased by three percent in 2016.
If a person without a job is not actively looking for work, that person is classified as not being in the labor force
Indicate whether the statement is true or false
When Javier's income increases by $5,000, he spends an additional $3,750 dollars. This implies that his marginal propensity to consume is 0.75
Indicate whether the statement is true or false