In the DSGE Framework, Prospects for a "Fiscal Cliff" in the Fall

question 30

Multiple Choice

In the DSGE framework, prospects for a "fiscal cliff" in the fall of 2012 increases ________ about the future leading firms to ________, which would ________.

• A) uncertainty; delay investment; slow economic activity
• B) federal surpluses; hire more workers; decrease unemployment
• C) state spending; reduce pensions; reduce the labor supply
• D) tax rates; increase investment; improve TFP
• E) interest rates; reduce investment; lead to better long-term growth

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Definitions:

Foreign Subsidiary

A company owned or controlled by another company that is based in another country.

Amortization Expense

The systematic and gradual charge to expense of the cost of an intangible asset over its useful life.

Functional Currency

A redefined definition: The currency that a business uses for most of its transactions, reporting, and financial statements.

Capital Assets

Long-term tangible or intangible assets used in operations of a business that are not intended for sale in the regular course of business.