The main reason that the deficit grows in a recession is that
a. the government reacts quickly and adjusts taxes to compensate.
b. monetary policy that targets interest rates causes the costs of borrowing to fall.
c. the deficit causes the recession, and reducing the deficit cures the recession.
d. many forms of taxes act as automatic stabilizers.
d
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If a U.S. company imports 10 Toyotas from Japan at $15,000 each, and the Japanese company buys airline tickets on a U.S. airline with the money, how does this affect the U.S. balance of payments accounts?
A) Decline in merchandise trade; increase in financial account B) Decline in financial account; increase in merchandise trade C) Decline in merchandise trade; increase in services D) Decline in services; increase in merchandise trade
Under the Exchange Rate Mechanism of the European Monetary System, when the British pound depreciated below its lower limit against the German mark, the German central bank was required to buy ________ and sell ________,
thereby ________ international reserves. A) pounds; marks; losing B) pounds; marks; gaining C) marks; pounds; gaining D) marks; pounds; losing