As a Result of the Action of Automatic Stabilizers

question 202

Multiple Choice

As a result of the action of automatic stabilizers,

• A)the government budget changes offset changes in national income.
• B)the government has had decreasing budget deficits over time.
• C)taxes and government spending rise when the economy enters a recession.
• D)taxes and government spending fall when the economy enters a recession.

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Definitions:

Market Portfolio

A theoretical portfolio that includes all assets in the market, with each asset weighted according to its market capitalization.

Risk Aversion

This concept describes an investor's preference to minimize uncertainty or to avoid risk in their investment decisions.

Risk-Free Rate

An anticipated gain from an investment devoid of financial risk, frequently illustrated through the returns on state bonds.

Arbitrage

The simultaneous purchase and sale of an asset in different markets to exploit price differences for a risk-free profit.