Figure 16-2 -Suppose That Figure 16-2 Shows the Effects of Reducing the Effects

question 107

Multiple Choice

Figure 16-2

-Suppose that Figure 16-2 shows the effects of reducing the budget deficit by raising taxes.If authorities do not want real GDP to fall, monetary policy must

• A)become sufficiently more expansionary to restore the aggregate demand curve to D? D?
• B)contract aggregate demand to be consistent with deficit-reducing fiscal policy.
• C)not lower interest rates and thwart the goal of a balanced budget.
• D)become more contractionary to lower the interest rate and spur investment.

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Definitions:

Stock Dividend

A distribution of additional shares to shareholders at no extra cost, based on the number of shares they already own.

Corporation's Assets

Resources owned by a corporation that have economic value and can contribute to the company's future income and benefits.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting liabilities, representing ownership interest held by shareholders.

Small Stock Dividends

Dividends paid by a company to its shareholders in the form of additional shares, typically representing less than 20-25% of the existing shares’ total value.