Which one of the following statements is true?
a. Discount rates should always be set to zero to maximize efficiency
b. Discount rates should be constant over time
c. The use of discount rates will always maximize future benefits
d. The use of discount rates becomes more problematic as longer time periods are considered
e. High discount rates promote resource conservation
Answer: d. The use of discount rates becomes more problematic as longer time periods are considered
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Income tax payments
a. fall during periods of prosperity, thus reducing inflationary pressures b. fall during periods of prosperity, thus increasing inflationary pressures c. rise during periods of prosperity, thus reducing inflationary pressures d. fall during recessions, thus increasing the problem of unemployment e. rise during recessions, thus increasing the problem of unemployment
If the government accelerates money supply growth and enlarges the budget deficit to stimulate aggregate demand, the rational expectations hypothesis indicates that decision makers will
a. ignore the policy until it exerts an observable impact on prices, output, and employment. b. quickly take steps to adjust their decision making in light of the more expansionary policies. c. be fooled at the outset but eventually adjust their decision making in accordance with the change in policy. d. be unaware that this policy change has been implemented until a higher rate of inflation is observed.