What Has Been the Practical Effect on Macroeconomic Policy of the Huge

question 42

Multiple Choice

What has been the practical effect on macroeconomic policy of the huge U.S.federal budget deficits of the 1980s?

• A)The automatic stabilizers no longer functioned.
• B)It was tough gaining support to cut taxes or raise government purchases of goods and services during cyclical downturns.
• C)Monetary policy has become less useful than fiscal policy because the deficits are so large that they have a greater impact than the money supply.
• D)There has been more emphasis on fine-tuning the economy than there was previously.
• E)There is now a consensus among economists that a balanced budget amendment should be adopted.

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Definitions:

CCA Tax Shield

A deduction that allows businesses to depreciate the cost of an asset over time for tax purposes, reducing their taxable income.

Lessee

A lessee is a person or entity who rents land or property from a lessor under the terms of a lease.

Lessor

An entity or individual that rents out an asset or property to another party, known as the lessee.

Tax Rate

A percentage at which an individual or corporation is taxed.