When the economy entered a serious recession in 2008, the response of the U.S. government was to institute a $700 billion bailout plan, pursue other heavy deficit spending, and take on unusually large liabilities through bond and money market fund guarantees. This is an example of:
A. procyclical fiscal policy.
B. fiscal policy that employs automatic stabilizers as the primary means of economic stabilization.
C. sound finance as fiscal policy.
D. functional finance and expansionary fiscal policy.
Answer: D
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The demand for a cup of coffee is ______________ than is the demand for a dinner at a fancy restaurant because _________________.
A. more price elastic; a cup of coffee requires a smaller portion of one's income. B. less price elastic; a cup of coffee requires a smaller portion of one's income. C. less price elastic; a cup of coffee is more of a luxury. D. more price elastic; a cup of coffee is more of a luxury.
The transaction motive for holding money
A. varies inversely with income. B. varies directly with the number of times one is paid annually. C. are used to make expected expenditures. D. are held for the same reasons that precautionary cash balances are held.
The figure above illustrates the problem of overcrowding and external costs experienced during the summer months in the state park. An efficient allocation of resources occurs at
A) point F. B) point G. C) point H. D) point I.
Which of the following is closest to the future value of a $4,000 deposit earning 2 percent interest annually after 10 years?
A. $4,122 B. $4,876 C. $5,025 D. $4,805