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:

GDP

Gross Domestic Product, the total value of all goods and services produced within a country's borders in a specific period of time.

Government Borrowing

The process by which governments finance their expenditures by borrowing money, typically through issuing bonds.

Crowding-Out Effect

A situation where increased government spending leads to reduced investment by the private sector due to higher interest rates or other mechanisms.

Multiplier

The multiplier, in macroeconomics, quantifies how initial changes in spending lead to larger changes in income and output through various rounds of spending.