Which of the following factors substantially reduces the effectiveness of discretionary changes in tax rates or government expenditures as a stabilization tool?
a. Even though computer models have enhanced our forecasting ability, policy makers at the Federal Reserve have been reluctant to utilize information supplied by the models.
b. When fiscal policy is altered, the Fed generally shifts monetary policy in a manner that offsets the impact of the fiscal action.
c. Changes in government expenditures and taxes are always offset by equal changes in private spending.
d. Since it takes time for fiscal policy to work and since the future is difficult to forecast, it is difficult to time fiscal policy changes correctly.
D
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
Refer to the scenario above. Which investment option will a risk-seeking individual choose?
A) He will choose to invest in Option A. B) He will choose to invest in Option B. C) He will choose to invest in Option C. D) He will be indifferent in investing in any of the three options.
The purpose of the Basel Committee was to
A) achieve a better coordination of the surveillance exercised by national authorities over the international banking system. B) achieve a better coordination of domestic banking systems. C) achieve a better coordination between brokers and investment bankers. D) achieve a better coordination between bond holder and bon issuers. E) manipulate bank rates for more leverage profits.
Individual Retirement Accounts and 401(k) plans make the current U.S. tax system
a. more like a consumption tax and so more like the tax system of many European countries. b. more like a consumption tax and so less like the tax system of many European countries. c. less like a consumption tax and so more like the tax system of many European countries. d. less like a consumption tax and so less like the tax system of many European countries.