Automatic Fiscal Policy Is at Work If, as Real GDP

question 4

Multiple Choice

Automatic fiscal policy is at work if, as real GDP increases,

• A) transfer payments decrease and interest rates decrease.
• B) transfer payments increase and tax revenues decrease.
• C) tax revenues increase and transfer payments decrease.
• D) tax revenues decrease and interest rates increase.

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Definitions:

Anchoring And Adjustment

A cognitive bias where an individual depends too heavily on an initial piece of information (anchor) when making decisions and makes insufficient adjustments based on subsequent information.

Availability

The degree to which a system, service, or product is operational and accessible when required for use.

Projection

A psychological defense mechanism where an individual ascribes their own unacceptable desires, impulses, or thoughts onto another person or group.

Representativeness

The degree to which a sample or instance accurately reflects the characteristics of a larger group.