Which of the following is an automatic stabilizer?
I. inheritance taxes
II. government payments to war veterans
III. aid to families with dependent children
IV. sales taxes
A) I, II, III, and IV
B) I, II, and III only
C) II and III only
D) III only
Ans: D) III only
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An economist estimates that .67 is the price elasticity of demand for disposable diapers. This suggests that disposable diaper producers could:
a. advertise more to raise the price elasticity of demand. b. encourage more parents to use cloth diapers. c. lower the price of disposable diapers to raise more revenue. d. raise the price of disposable diapers to raise more revenue. e. maximize revenues by staying at the current price.
A government budget deficit will have a:
a. positive effect on public saving causing a rightward shift in the supply of loanable funds. b. positive effect on public saving causing a leftward shift in the supply of loanable funds. c. negative effect on public saving causing a rightward shift in the supply of loanable funds. d. negative effect on public saving causing a leftward shift in the supply of loanable funds.