Automatic Stabilizers

question 73

Multiple Choice

Automatic stabilizers

• A)increase the problems that lags cause in using fiscal policy as a stabilization tool.
• B)are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession.
• C)are changes in taxes or government spending that policy makers quickly agree to when the economy goes into recession.
• D)All of the above are correct.

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Definitions:

Bad Debts Expense

An expense reported on the income statement, accounting for the estimated amount of accounts receivable that are not expected to be collected.

Allowance Method

The allowance method is an accounting technique used to estimate and prepare for the amount of accounts receivable that may not be collectible.

Journal Entries

Records of financial transactions in the accounting system, detailing debits and credits to various accounts.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's receivables that may not be collectible.