The chairman of the House Ways and Means committee, who has major sway on spending programs, has been researching the economy and believes that the nation is heading for an inflationary spiral. Inflation is currently not considered a problem. He proposes a fiscal policy solution. Which of the following would not impede his proposition from alleviating the problem?
I.congressional opposition to spending cuts
II.difficulty determining the degree of spending cuts required
III.correctly choosing between tax hikes and spending cuts
IV.impact lag -
V.recognition lag -
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A. B. C. D. E. F.B
I, II, IV, and V are classic problems with fiscal policy. III is incorrect because in terms of fiscal policy tax or spending measures are interchangeable.
To determine which option would not impede the chairman's proposition from alleviating the inflationary problem, let's analyze each statement:
I. Congressional opposition to spending cuts: If there is opposition to spending cuts, it would impede the chairman's proposition. Cutting spending is one of the proposed fiscal policy solutions to address inflation. If Congress opposes spending cuts, it would hinder the implementation of the chairman's plan. Therefore, statement I would impede the proposition.
II. Difficulty determining the degree of spending cuts required: If it is challenging to determine the appropriate level of spending cuts needed to address inflation, it could impede the chairman's proposition. It is crucial to have a clear understanding of the extent of spending cuts required to have an effective impact. Therefore, statement II would impede the proposition.
III. Correctly choosing between tax hikes and spending cuts: This statement suggests that correctly choosing between tax hikes and spending cuts would not impede the chairman's proposition. It implies that if the chairman can make the right decision between these two options, it would not hinder the effectiveness of the proposition. Therefore, statement III would not impede the proposition.
IV. Impact lag: Impact lag refers to the delay between implementing a policy and observing its effect. In this case, if there is an impact lag in the proposed fiscal policy solution, it would not impede the chairman's proposition. The impact lag may cause a delay in the desired outcome, but it does not prevent the solution from being effective. Therefore, statement IV would not impede the proposition.
V. Recognition lag: Recognition lag refers to the time it takes for policymakers to recognize an economic problem. If there is a recognition lag, it means that policymakers are slow in identifying the problem. However, it does not necessarily impede the chairman's proposition. The proposition aims to address the inflationary spiral, regardless of the recognition lag. Therefore, statement V would not impede the proposition.
Based on the analysis above, the option that would not impede the chairman's proposition is option A. III, IV.