Which of the Following Is an Example of an Automatic

question 148

Multiple Choice

Which of the following is an example of an automatic stabilizer?  

• A) tax reductions passed by Parliament in times of unemployment 
• B) tax reductions passed by Parliament in times of inflation 
• C) government defence spending 
• D) unemployment insurance

---

Definitions:

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an asset at a predetermined price within a specific time period.

Interest Rate Swap

A financial contract between two parties to exchange interest rate payments on a specified principal amount, often used to manage risk or alter interest rate exposure.

Floating Rate

An interest rate that fluctuates over time with the market or an index.