The main reason that the deficit grows in a recession is that
A. the government reacts quickly and adjusts taxes to compensate.
B. monetary policy that targets interest rates causes the costs of borrowing to fall.
C. the deficit causes the recession, and reducing the deficit cures the recession.
D. many forms of taxes act as automatic stabilizers.
Answer: D
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In the above figure, if the price is $1.25 per gallon of milk and 5 million gallons are produced and consumed, then the consumer surplus is ________ and the producer surplus is ________
A) $3.125 million; $3.125 million B) $12.5 million; $12.5 million C) $6.25 million; $6.25 million D) None of the above answers are correct.
Suppose Michigan’s NOX abatement standard for existing (E) sources is 4 units and the EPA's standard for new (N) sources is 10 units and that MACE = 1.8AEand MACN = 1.2AN. To meet the same combined abatement level of 14 but in a cost-effective manner, the standards for each should be
a. AE = 7; AN = 7 c. AE = 5.6; AN = 8.4 b. AE = 4.8; AN = 7.2 d. none of the above
Suppose a bank has $300,000 in deposits and a required reserve ratio of 15 percent. Then required reserves are
A. $45,000. B. $300,000. C. $255,000. D. $4,500.
With a natural monopoly, a potentially insurmountable barrier to entry can be the
A. low profit margins. B. decreasing average total costs. C. high fixed costs. D. decreasing marginal costs.