Automatic Stabilizers Create ________ During Recessions from Increased Government Spending

question 15

Multiple Choice

Automatic stabilizers create ________ during recessions from increased government spending on welfare and unemployment insurance, and reduced tax revenues, and create _________ during peak growth periods of the economy from reduced government welfare spending and increased tax revenues.

• A) fiscal stimulus, fiscal contraction
• B) fiscal stimulus, fiscal stimulus
• C) fiscal contraction, fiscal stimulus
• D) fiscal contraction, fiscal contraction

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Definitions:

Unlawful Misdirection

The act of intentionally guiding or directing someone in a wrong or illegal path.

Governmental Resources

Assets, finances, and other resources controlled or owned by the government for public use and administration.

Allocative Efficiency

A state in which resources are allocated in a way that maximizes the net benefit to society or achieves the desired distribution among competing uses.

Productive Efficiency

Productive efficiency occurs when an economy or entity produces goods and services at the lowest possible cost, utilizing all available resources without waste.