The Effectiveness of the Built-In or Automatic Stabilizers Is Limited

question 2

Multiple Choice

The effectiveness of the built-in or automatic stabilizers is limited because:

• A)the stabilizers produce budget surpluses during recessions.
• B)transfer payments and subsidies increase during inflation and decrease during recessions.
• C)the offset which the stabilizers provide to a change in private spending is less than the change in private spending.
• D)the stabilizers raise the general price level regardless of the phase of the business cycle.

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Definitions:

Dividend Growth Rate

The rate at which a company's dividend payments to shareholders increase over time.

Earnings

The amount of profit that a company produces during a specific period, which is often used to gauge the company's financial performance.

Growing Perpetuity

A type of investment that provides an infinite series of cash flows that grow at a consistent rate indefinitely.