Fiscal Policy Can Stabilize Output in the Coordination Failure Model

question 9

Multiple Choice

Fiscal policy can stabilize output in the coordination failure model by

• A) dampening the fluctuations in the business cycle.
• B) controlling government spending.
• C) lowering the real interest rate.
• D) eliminating multiple equilibriums.
• E) eliminating sunspots.

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Definitions:

Consolidation

The process of combining the financial statements of a parent company and its subsidiaries into one comprehensive financial statement.

Goodwill

A non-physical asset that occurs when a business purchases another business at a cost exceeding the fair market value of its identifiable net assets.

Business Combination

A transaction or other event in which an acquirer obtains control of one or more businesses, which can be achieved through acquisitions, mergers, or consolidations.

Consolidate

In financial context, to combine assets, liabilities, and other financial items of two or more entities into one.