Question

1) During an expansion, automatic stabilizers cause the federal deficit to a) remain unchanged. b) either...

1) During an expansion, automatic stabilizers cause the federal deficit to

a) remain unchanged.

b) either increase or decrease.

c) increase.

d) decrease.

2) An example of an automatic stabilizer is

a) changing the tax laws to increase the marginal tax rates.

b) the food stamp program.

c) the indexation of social security benefits to the consumer price index.

d) the interest the government pays on loans.

3) Which of the following is a correct sequence of events during a recession?

a) unemployment rises, income rises, tax revenue rises, unemployment benefits rise, and the budget deficit rises

b) unemployment rises, income falls, tax revenue falls, unemployment benefits rise, and the budget deficit rises

c) unemployment falls, income falls, tax revenue falls, unemployment benefits rise, and the budget deficit rises

d) unemployment rises, income falls, tax revenue rises, unemployment benefits fall, and the budget deficit falls

4) The total amount owed by the federal government to the public is the

a) net tax revenue.

b) fiscal drag.

c) federal debt.

d) federal budget deficit.

5) If the government wants to increase employment, government purchases should be ________ and/or taxes should be ________.

a) decreased; increased

b) increased; decreased

c) increased; increased

d) decreased; decreased

0 0
Add a comment Improve this question Transcribed image text
Answer #1

1. Option D

Explanation: Automatic stabilizers decrease deficit in expansion and increase deficit in recession.

2. Option C

Explanation: Automatic stabilizers come into action automatically after certain economic even occurs.

3. Option B. unemployment rises, income falls, tax revenue falls, unemployment benefits rise, and the budget deficit rises.

Explanation: In recession, output falls so people lose jobs and unemployment rises. As a result, income falls and tax revenue also falls. Since government needs to pay higher unemployment benefits, the government deficit rises.

4. c) federal debt.

Explanation: Federal debt is how much the federal government owes to the government.

5. b) increased; decreased

Explanation: This would result in an expansionary fiscal policy.

Add a comment
Know the answer?
Add Answer to:
1) During an expansion, automatic stabilizers cause the federal deficit to a) remain unchanged. b) either...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • QUESTION 1 Which of the following is an example of an automatic fiscal policy stabilizer? a....

    QUESTION 1 Which of the following is an example of an automatic fiscal policy stabilizer? a. Tax revenues fall as real GDP decreases. b. Congress decides to cut spending on national defense. c. Congress cuts individual income tax rates. d. Tax revenues rise after Congress raises corporate tax rates. QUESTION 7 When a country's economy is producing at a level that is less than its potential GDP, the standardized employment deficit will show a ________ than the actual deficit. a....

  • Classify the actions below as either discretionary spending or an automatic stabilizer. Place each item into...

    Classify the actions below as either discretionary spending or an automatic stabilizer. Place each item into one of the two bins. The president implements cuts in government spending in order to balance the budget A law is enacted that increases The government cuts taxes to Medicare coverage stimulate consumer spending The government increases tax rates to prevent inflation A reduction in tax revenue that results from a recession reducing personal income and corporate profits An increased number of layoffs Economic...

  • 12. The progressive income tax and transfer payments are the two main: A) automatic stabilizers. B)...

    12. The progressive income tax and transfer payments are the two main: A) automatic stabilizers. B) monetary policy tools. C) long-run aggregate supply management tools. D) tools for balancing the budget. 13. Automatic stabilizers include all of the following EXCEPT: A) unemployment compensation benefits. B) welfare payments. C) national defense spending. D) tax revenues. 14. The implementation lag is: A) usually less than 12 months. B) the time it takes policymakers to recognize a problem. C) the time it takes...

  • Which one of these is NOT an example of an automatic stabilizer? Select one: O a....

    Which one of these is NOT an example of an automatic stabilizer? Select one: O a. Interest rates tend to fall during recessions b. People pay more income tax when the economy is growing and their income rise c. The government typically increases spending on highways during expansions d. Wages'tend to fall when unemployment is high e. Unemployment compensation tend to rise during recessions

  • 7. Those who advocate counter-cyclical fiscal policy would agree with all but one of the following...

    7. Those who advocate counter-cyclical fiscal policy would agree with all but one of the following statements. Which is the exception? A) Governments should be non-interventionist. B) Automatic stabilizers are not particularly effective. C) The economy is not capable of automatic self-adjustment in response the problems of unemployment and inflation. D) Counter cyclical fiscal policy is a powerful and effective tool. E) Government budget deficits are a less serious problem than income gaps. 8. Assume that the economy is in...

  • Question 25 (2.5 points) Which of the following would cause a downward shift in the consumption...

    Question 25 (2.5 points) Which of the following would cause a downward shift in the consumption function? a tax decrease an increase in wealth a stock market crash a decrease in the price level expectations of higher future income Question 26 (2.5 points) According to supply-side economists, the by curve will shift to the caused AD; right; more investment AD; left; more saving AS; right; more investment AS; left; more saving money supply; right; lower interest rates Question 28 (2.5...

  • Check answers please ? s) If the economy is in a recession, 8) A) The economy...

    Check answers please ? s) If the economy is in a recession, 8) A) The economy suffers from structural unemployment, which can be alleviated by debt refinancing. B) Larger deficits will decrease the national debt. C) Deficit spending will not increase the size of the debt because interest rates will be falling. D) It is operating inside the production posibilities curve, and the opportunity cost of deficit spending is zero. 9 9) An increase in unemployment, ceteris paribus, A) Reduces...

  • 1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a....

    1. To stimulate economic activity during a severe recession, the strongest appropriate fiscal policy is: a. an increase in taxes and/or an increase in government spending b. an increase in taxes and/or a decrease in government spending c. a decrease in taxes and/or an increase in government spending d. a decrease in taxes and/or a decrease in government spending e. a decrease in government purchases and/or a decrease in transfer payments 2. An increase in income tax rates: a. makes...

  • What is the most important automatic stabilizer? a. government spending b. the tax system c. welfare...

    What is the most important automatic stabilizer? a. government spending b. the tax system c. welfare benefits d. unemployment compensation

  • Question 4 Flag question Not yet answered Marked out of 1.00 A feature of automatic stabilizers...

    Question 4 Flag question Not yet answered Marked out of 1.00 A feature of automatic stabilizers is that they: Select one: a. automatically result in surpluses during recessions and deficits during economic booms b. automatically decrease the price level during inflation and increase the price level during deflation. C. do not require any legislative action by Congress to take effect. O d. guarantee that the federal budget will be balanced over the course of the business cycle.. o e. simultaneously...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT