If Fiscal Policy Is Going to Exert a Stabilizing Impact

question 3

Multiple Choice

If fiscal policy is going to exert a stabilizing impact on the economy, it must be

• A) instituted by the Federal Reserve system.
• B) expansionary during an economic boom but restrictive during a recession.
• C) timed correctly.
• D) passed by a three-fifths majority in Congress.

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Definitions:

Stockholders' Equity

The residual interest in the assets of an entity that remains after deducting its liabilities.

Common Shares

Equity securities that represent ownership interests in a corporation, providing voting rights and dividends.

Book Value

The value of an asset as it appears on a balance sheet, calculated by subtracting accumulated depreciation from the asset's cost.

Dividends in Arrears

Outstanding dividends on cumulative preferred stock that have not been paid by the corporation by the specified payment date.