Which of the following is an automatic stabilizer?
I. inheritance taxes
II. government payments to war veterans
III. aid to families with dependent children
IV. sales taxes
A) I, II, III, and IV
B) I, II, and III only
C) II and III only
D) III only
Ans: D) III only
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Which of the following is most subject to the lemons problem?
A) credence goods B) homogeneous goods C) search goods D) inferior goods
The United Bank of Glassen only lent money to a limited number of big business houses. After a financial crisis, the bank went out of business. Which of the following reasons could have contributed to the collapse of this bank?
a. Their decision not to lend funds to the Federal Reserve b. Their decision not to diversify their asset portfolio c. Their decision to extend loans to a diversified pool of borrowers d. Their decision to extend mainly short-term loans e. Their decision to unnecessarily scrutinize each borrower's details
If all variable taxes in the United States were removed and only fixed taxes remained, what would be the effect on the expenditures schedule?
a. The expenditure schedule will shift upward and become steeper. b. The expenditure schedule will shift upward and become less steep. c. The expenditure schedule will shift downward and become less steep. d. The expenditure schedule will shift downward and become steeper.
Describe three arguments of why some economists object to the predictions of the rational expectations theory and do not subscribe to the conclusions of this approach