Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 34, Problem 6QCMC
To determine
Automatic stabilizers.
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Which of the following is an example of an automatic stabilizer?
When the economy goes into a recession,…
a.More people become eligible for unemployment insurance benefits.
b.Stock prices decline, particularly for firms in cyclical industries.
c.Congress begins hearings about a possible stimulus package.
d.The Federal Reserve changes its target for the federal funds rate.
Reason why B, C, D are wrong?
Which of the following is NOT an automatic stabilizer? a. income taxes b. unemployment insurance c. Medicaid d. food stamps e. monetary policy
Briefly discuss how time lag could be an argument against policy activism. What is the role of automatic stabilizer in this context? Explain with examples
Chapter 34 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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Similar questions
- Which of the following is NOT an automatic stabilizer? income taxes transfers for welfare payments unemployment insurance benefits government spending on educationarrow_forwardWhich of the following is an example of an automatic stabilizer? tax rates the MPC the amount of dollars collected in taxes interest ratesarrow_forwardWhich of the following is not an automatic stabilizer. Pick a,b,c, or d A) Sales tax B)State retirement pension C) unemployment benefits D)income taxarrow_forward
- please answer the following question: 1. Automatic stabilizers:A) work without the need for decisions from Congress or the White House.B) require explicit actions each year by policy makers to become active.C) increase elections during recessions.D) increase aggregate demand during an economic boom.arrow_forwardWhich of the following are examples of automatic stabilizers? Check all that apply. Personal income taxes Corporate income taxes The discount ratearrow_forwardWhich of the following illustrates the effectiveness lag? A.Policymakers implement contractionary fiscal policy but it will be a few months before it starts working. B.Policymakers believe an economic downturn has occurred, but they decide not to take action until they are sure. C.Policymakers first learn of the recession when it is five months old. D.Policymakers agree to increase taxes, but it will be at least two months before the policy is implemented.arrow_forward
- If government policy makers were worried about the inflationary potential of the economy, which of the following would be a correct fiscal policy change?arrow_forwardIn preparing their estimates of the stimulus package's effect on GDP, Obama administration economists estimated a government purchases multiplier of 1.57. Economist Robert Barro argues that the government purchases multiplier would be lower than the administration's estimate, and economists Lawrence Christiano, Martin Eichenbaum, and Sergio Rebelo argued that the multiplier would be higher than the administration's estimate. when the unemployment rate is high; when the value of the dollar is depreciating against foreign currencies when the federal budget is in surplus; when government transfer payments are declining during wartime; when short-term interest rates are near zero during a recession; when the inflation rate is relatively lowarrow_forwardWhich of the following would not be considered an automatic stabilizer? Question 13 options: Income tax Unemployment compensation Education spending Food stampsarrow_forward
- Which of the following is not an automatic stabilizer? A. Unemployment compensation. B. Defense spending. C. Progressive income tax rates (that is, higher marginal tax rates that rise with income). D. All of the answers are automatic stabilizersarrow_forwardWhich of the following is a reason for using expansionary fiscal policy during a recession? a) reduce unemployment b) All of the choices are correct c) help the economy return to full employment d) help increase GDP, job opportunities, and production in the economy e) increase employmentarrow_forwardWhat type of fiscal policy would be appropriate to use during a recessionary period? How might this affect aggregate demand, unemployment, and inflation?arrow_forward
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