Discretionary fiscal policy occurs when:
a. the government passes a new law that changes tax or spending levels.
b. the government borrows funds from the public
c. the Federal Reserve issues new currency notes.
d. the Federal Reserve increases the market interest rate.
a
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If the Fed has the discretion to choose its policy and announces a low inflation policy, then
a. the public is likely to discount this claim because the Fed has an incentive to change their policy in the future. b. the public is likely to believe this claim because the Fed has no incentive to change their policy in the future. c. the Fed will always cheat and increase inflation in the future. d. the Fed will have to keep inflation lower in the future or they will be voted out of office. e. none of the above.
The term opportunity cost refers to the
a. value of what is gained when a choice is made. b. difference between the value of what is gained and the value of what is forgone when a choice is made. c. value of what is forgone when a choice is made. d. direct costs involved in making a choice.