____________________ Switches Are Drawn by Adding a Wedge to One

question 7

Essay

____________________ switches are drawn by adding a wedge to one of the four basic switches.

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Definitions:

Budget Deficit

A financial situation where a government's expenditures exceed its revenues within a specific period, leading to borrowing or depleting reserves.

Automatic Stabilizers

Economic policies and programs, like unemployment benefits, that automatically adjust to stabilize an economy during fluctuations.

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, usually visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

Automatic Stabilizers

Economic mechanisms, such as progressive taxation and welfare, that automatically adjust to counteract economic fluctuations without the need for explicit government intervention.