Suppose a wave of investor and consumer pessimism causes a reduction in spending. If the Federal Reserve chooses to engage in activist stabilization policy, it should
A. decrease the money supply and increase interest rates.
B. increase the money supply and decrease interest rates.
C. decrease government spending and increase taxes.
D. increase government spending and decrease taxes.
Answer: B. increase the money supply and decrease interest rates.
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Some time ago an executive of a Broadcasting company argued before a congressional committee that they should make a law rating TV shows for violence content. He said that children are damaged and violence must be curbed. He indicated that his own network shows too much violence and that he would welcome a law himself so that Turner Broadcasting would show less violence. Explain why someone who shows violence on his TV channels is arguing for government regulation of himself.
What will be an ideal response?