Which of the Following Is an Example of an Automatic

question 56

Multiple Choice

Which of the following is an example of an automatic fiscal policy action?

• A)increased unemployment payments resulting from higher unemployment
• B)an increase in spending on defense goods resulting from increased world tensions
• C)an increase in the tax rate resulting from a desire to shrink the budget deficit
• D)a decrease in the tax rate resulting from an effort to increase aggregate demand to combat a recession
• E)None of the above answers are correct.

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Definitions:

Straight-Line Depreciation

A method of calculating the depreciation of an asset, dividing the difference between its cost and salvage value evenly over its useful life.

Capital Budgeting

involves the evaluation and selection of long-term investments that are in line with the goal of maximizing the value of a firm.

Incremental Sales

The additional sales generated by a particular business action or decision, reflecting the net increase in sales due to that specific activity.

Operating Expenses

Expenses that relate to the day-to-day operations of a business, excluding costs associated with the production of goods.