Given all the complications that can result with fiscal policy, is fiscal policy still considered an effective policy tool for stabilizing business cycle fluctuations?
What will be an ideal response?
While some economists believe it is best not to engage in fiscal policy at all and instead focus on monetary policy, most economists believe that fiscal policy has a place in stabilization policy. Currently, most economists believe that fiscal policy is useful to ‘push’ the economy in a certain direction, but not necessarily ‘fine-tune it’ to a particular outcome. They argue that if monetary policy is keeping the economy relatively stable, fiscal policy should remain fairly neutral. In cases where recessions are deep and long-lasting or inflation threatens to rapidly rise, major adjustments in fiscal policy may be helpful to stabilize the economy. Economists do warn that the long-term effects of short-term applications of fiscal policy should be considered to ensure that there aren’t adverse effects in terms of aggregate supply, inflation and growth.
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Haiti was once heavily forested. Today, 80 percent of Haiti's forests have been cut down, primarily to be burned to create charcoal. The reduction in the number of trees has led to devastating floods when it rains heavily. This is an example of
A) the tragedy of the commons. B) tragic externalities. C) human greed. D) the consequences of too many people having private property rights.
The mercantilism policy failed to generate gains from trade for countries which adopted it because of: a. increases in consumer spending
b. high levels of federal debt. c. supply-side shocks from the oil-exporting countries. d. runaway inflation in the U.S. e. retaliations from other countries.
Which of the following would be of particular interest to a microeconomist?
a. The price of fruit the typical household consumes. b. The nation's inflation rate. c. The nation's rate of unemployment. d. The budget of the national government. e. The growth of the economy.
The absence of freedom of entry and exit is key to fact that there is no pressure for economic profit to go to zero under
A. perfect competition and monopolistic competition. B. oligopoly and monopoly. C. monopoly and monopolistic competition. D. monopoly and Perfect competition.