Question

QUESTION 14 An automatic stabilizer is a tool that helps reduce the effect of a fall in demand for a firm's product. a tool that ensures imports always equal exports in an economy a feature of the economy that reduces its sensitivity to shocks a feature of the economy that reduces its dependence on international trade. QUESTION 15 M1 includes currency, travelers' checks, and checking accounts currency, travelers' checks, checking accounts, and savings accounts. currency None of the above. QUESTION 16 Which of the following is an argument in favor of central bank independence? Independence permits objective decision-making regarding monetary policy that is not based on politics. Independence ensures that fiscal policy implemented by the government will lead to low unemployment rates. Independence ensures that monetary policy reinforces inflationary fiscal policies Independence permits the central bank to correct any deficits in the federal budget without government

Answer 1

1. C is the correct option

According to the definition of Automatic stabilizer it is designed to counter any negative economic shock or recession that is faced by a country. It is a tool of Keynesian economics that uses government spending and taxes to support the economy.

2. A is the correct option

M1 is defined as the money supply that composes of physical currency, coin, demand deposits, travelers' checks and other checking accounts. It excludes financial assets like savings account and bond.

3. A is the correct option

Central bank independence (CBI) is the ability given to CB to control monetary instruments. This independence is actually from the current government and politics to take decisions regarding the monetary policies.