Which of the following is an example of an automatic stabilizer?
a. Congress legislates lower tax rates to increase consumption and investment.
b. Tax rates are increased during a recession to maintain a balanced budget.
c. A regressive income tax system reduces tax revenues (as a share of income) as income expands.
d. Revenues from the corporate income tax increase sharply during a business boom but decline substantially during a recession, even though no new tax legislation has been enacted.
d
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A lender who is worried that its cost of funds might rise during the term of a loan it has made can hedge against this rise without eliminating the chance to profit from a decline in the cost of funds by
A) buying futures contracts on Treasury bills. B) selling futures contracts on Treasury bills. C) buying put options on Treasury bills. D) buying call options on Treasury bills.
What are the similarities and differences between the law of demand and the law of supply?
What will be an ideal response?