Question

Automatic stabilizers are changes in taxes or government spending that decrease aggregate demand without requiring policymakers to act when the economy is in an expansionary boom that is causing inflation.

Select one:

True

False

If there is no change in the unemployment compensation program, then the total amount of benefits paid to participants in the program will fall during economic expansions and rise during recessions.

Select one:

True

False

Critics of stabilization policy argue that the policy can be a source of, instead of a cure for, economic fluctuations because the lags associated with a discretionary policy create the possibility that an expansionary fiscal policy is implemented when the economy has already adjusted on its own to the natural rate of output.

Select one:

True

False

According to liquidity preference theory, a decrease in money demand for some reason other than a change in the price level causes the interest rate to rise, so aggregate demand shifts right.

Select one:

True

False

Automatic stabilizers tend to make the government’s budget move toward a deficit during recessions and toward a surplus during an economic expansion.

Select one:

True

False

Answer 1

Q. Automatic stabilizers are changes in taxes or government spending that decrease aggregate demand without requiring policymakers to act when the economy is in an expansionary boom that is causing inflation.

Answer- True

Q. If there is no change in the unemployment compensation program, then the total amount of benefits paid to participants in the program will fall during economic expansions and rise during recessions.

Answer- True

Q. Critics of stabilization policy argue that the policy can be a source of, instead of a cure for, economic fluctuations because the lags associated with a discretionary policy create the possibility that an expansionary fiscal policy is implemented when the economy has already adjusted on its own to the natural rate of output.

Answer- True

Q. According to liquidity preference theory, a decrease in money demand for some reason other than a change in the price level causes the interest rate to rise, so aggregate demand shifts right

Answer- False

Q. Automatic stabilizers tend to make the government’s budget move toward a deficit during recessions and toward a surplus during an economic expansion

Answer- True