Automatic Stabilizers Tend to Exaggerate the Severity of Business Cycles

question 11

True/False

Automatic stabilizers tend to exaggerate the severity of business cycles.

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Definitions:

Monetary Policy

Actions undertaken by a central bank to control the money supply and interest rates in the economy.

Deposit Expansion Multiplier

A ratio that measures the potential increase in total bank deposits that can result from an initial deposit, based on the reserve requirement ratio.

Government Securities

Financial instruments issued by the government to borrow money from investors that usually come with a promised set of future payments.

Depository Institutions

Financial institutions that accept deposits from the public, such as banks, credit unions, and savings and loan associations.