If the government's budget is balanced at the start of a recession, and the government is attempting to stabilize the economy through fiscal policy
A. a budget surplus would be expected.
B. a budget deficit would be expected.
C. government spending, taxes, and transfer payments must all be reduced in a fashion that preserves a balanced budget.
D. it should increase government spending, lower taxes, and increase transfer payments in a manner that preserves a balanced budget.
E. government spending, taxes, and transfer payments must remain unchanged.
B. a budget deficit would be expected.
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Refer to the above figure. A budget deficit occurs when real national income is
A) Y3. B) Y1. C) Y2. D) None of the above: cannot be determined given the information.
A recessionary gap occurs when
A. the price level is too low. B. equilibrium real GDP is greater than potential GDP. C. equilibrium real GDP falls short of potential GDP. D. the government does not stimulate investment spending.
Monetary policy-makers can help smooth out the fluctuations of the business cycle by _____.
(A) Implementing inside lags. (B) Reacting to current trends. (C) Practicing good timing. (D) Examining banks.
Which of the following helps to reduce risk?
A) Abstain from risk taking. B) Obtain more information. C) Diversify. D) All of the above.