If the Economy Is to Have Built-In Stability,when Real GDP

question 253

Multiple Choice

If the economy is to have built-in stability,when real GDP falls

• A)tax revenues and government transfer payments should fall.
• B)tax revenues and government transfer payments should rise.
• C)tax revenues should fall and government transfer payments should rise.
• D)tax revenues should rise and government transfer payments should fall.

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Definitions:

Discretionary Fiscal Policy

Involves the use of government spending and tax policies to influence the economy, based on current economic conditions and objectives.

Natural Rate

The natural rate is a concept in economics describing conditions where the economy is at equilibrium, with full employment and no inflationary or deflationary pressures.

Aggregate Supply

The aggregate amount of products and services that companies in an economy are prepared and able to offer at a specific general price level during a certain time frame.

Natural Rate

Refers to the equilibrium rate of unemployment or interest where the economy is stable, without accelerating inflation.