Active Changes in Tax and Spending by Government Intended to Smooth

question 105

Multiple Choice

Active changes in tax and spending by government intended to smooth out the business cycle are called ________, and changes in taxes and spending that occur passively over the business cycle are called ________.

• A)automatic stabilisers; discretionary fiscal policy
• B)discretionary fiscal policy; automatic stabilisers
• C)automatic stabilisers; monetary policy
• D)discretionary fiscal policy; conscious fiscal policy

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Definitions:

Long-Run Equilibrium

A state in economics where all factors of production and costs are variable, leading to a situation where firms are earning normal profits and no new firms enter or exit the industry.

Plaster

A building material used for coating, protecting, and decorating walls and ceilings, made from lime, sand, and water.

Labor

The involvement of human physical exertion and cognitive efforts in the manufacture of goods and services.

Interest Rate

The percentage charged on borrowed money or paid on invested capital, representing the cost of borrowing or the gain on investing.