Automatic Stabilizers

question 52

Multiple Choice

Automatic stabilizers

• A) increase the problems that lags cause in using fiscal policy as a stabilization tool.
• B) are changes in taxes or government spending that increase aggregate demand without requiring policymakers to act when the economy goes into recession.
• C) are changes in taxes or government spending that policymakers agree to when the economy goes into recession.
• D) are part of discretionary fiscal policy.

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Definitions:

Long Run

A period in economics in which all factors of production and costs are variable, allowing all inputs to be adjusted.

Perfectly Inelastic

A situation where demand does not change at all in response to changes in price.

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a certain price over a specified period.

Price Effect

The impact on consumer demand and company revenue as the cost of a good or service changes.