Differentiate between discretionary fiscal policy and non discretionary or built-in stabilization policy.
What will be an ideal response?
Discretionary fiscal policy is the deliberate manipulation of taxes and government spending by the Congress to alter real domestic output and employment, to control inflation, and to stimulate economic growth during a particular period of time. Non discretionary fiscal policy, on the other hand, is the change in government expenditures or taxes which occurs automatically as a result of existing laws. In particular, personal income taxes have progressive rates and will slow spending and inflation as GDP expands; when GDP declines, taxes will decrease by a more than proportionate amount allowing incomes and spending to decline at a slower rate than GDP. There are also many transfer payment programs which become effective when incomes decline or unemployment occurs to reduce the decline in disposable income. Conversely, these programs automatically are reduced when the economy expands and unemployment declines and spending increases.
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Which of the following is not an example of an economic trade-off that a firm has to face?
A) whether it is cheaper to produce with more machines or with more workers B) whether it should produce more of its product C) whether or not consumers will buy its products D) whether it is to outsource the production of a good or service
A long-term loan that is given to a firm is known as a
A) share of stock. B) bond. C) dividend. D) random walk.
Winner-take-all labor markets are commonly found in
a. sports and entertainment industries b. unionized industries c. the government sector d. the legal services industry e. service industries in general
Rational production decisions require an understanding of
a. trade-offs. b. opportunity costs. c. scarcity of resources. d. All of the above are correct.