Which of the following does NOT limit the effectiveness of discretionary fiscal policy?
A) the difficulty of estimating the natural rate of unemployment
B) time lags involved in enacting appropriate legislation
C) the difficulty of getting an accurate measure of the rate of inflation
D) time lags involved in recognizing the need for fiscal policy

Question

Which of the following does NOT limit the effectiveness of discretionary fiscal policy?  
A) the difficulty of estimating the natural rate of unemployment 
B) time lags involved in enacting appropriate legislation 
C) the difficulty of getting an accurate measure of the rate of inflation 
D) time lags involved in recognizing the need for fiscal policy

Quizplus · Accepted Answer

While accurately measuring the rate of inflation is important for determining the appropriate fiscal policy, it does not necessarily limit the effectiveness of discretionary fiscal policy. The other options listed all involve time lags or difficulties in enacting and recognizing the need for fiscal policy, which can limit its effectiveness.

Which of the Following Does NOT Limit the Effectiveness of Discretionary