What is discretionary fiscal policy and what is its purpose?
What will be an ideal response?
Discretionary fiscal policy is the deliberate changing of government spending and/or taxes. Its purpose is to move the economy toward full employment with price stability more rapidly than it would if left on its own.
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When the government chooses to use resources to build a dam, these sources are no longer available to build a highway. This choice illustrates the concept of
A) a market mechanism. B) macroeconomics. C) opportunity cost. D) a fallacy of composition.
The nominal interest
A) will never be negative. B) can be negative if inflation is unexpected. C) can be negative if the inflation rate is greater than the nominal interest rate. D) can be negative if deflation occurs. E) can be negative when the real interest rate is negative.