Built-in stability means that:
A. an annually balanced budget will offset the procyclical tendencies created by state and
local finance and thereby stabilize the economy.
B. with given tax rates and expenditures policies, a rise in domestic income will reduce a
budget deficit or produce a budget surplus while a decline in income will result in a deficit
or a lower budget surplus.
C. Congress will automatically change the tax structure and expenditure programs to correct
upswings and downswings in business activity.
D. government expenditures and tax receipts automatically balance over the business cycle,
B. with given tax rates and expenditures policies, a rise in domestic income will reduce a
budget deficit or produce a budget surplus while a decline in income will result in a deficit
or a lower budget surplus
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In John Rawls’ A Theory of Justice, people choose the rules for distributing income from behind a veil of ignorance. People understand that ability determines income, but they do not know their abilities or the abilities of others. Rawls argues that people are risk averse and will choose the distribution rule that maximizes their income in the worst-case scenario (they have relatively little ability). An economist would call this strategy
A. minimax. B. maximin. C. irrational. D. tacit collusion.
If Individual A and Individual B face a prisoner's dilemma, the ideal strategy is for: a. Individual A to confess and Individual B to not confess. b. Individual B to confess and Individual A to not confess. c. both individuals to confess
d. both individuals to not confess.
The nominal (money) rate of interest
a. is the real rate of interest plus the inflationary premium. b. can be expected to decline as inflation accelerates. c. fell to historic lows during the 1970s when the United States experienced double-digit rates of inflation. d. can be expected to increase when the government is running a budget surplus.
The law of demand states that, other things equal, an increase in
a. price causes quantity demanded to increase. b. price causes quantity demanded to decrease. c. quantity demanded causes price to increase. d. quantity demanded causes price to decrease.