The Effectiveness of the Built-In or Automatic Stabilizers Is Limited

question 2

Multiple Choice

The effectiveness of the built-in or automatic stabilizers is limited because:

• A)the stabilizers produce budget surpluses during recessions.
• B)transfer payments and subsidies increase during inflation and decrease during recessions.
• C)the offset which the stabilizers provide to a change in private spending is less than the change in private spending.
• D)the stabilizers raise the general price level regardless of the phase of the business cycle.

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Definitions:

Cash Concentration

The process of consolidating cash from multiple accounts into a single account, aiming to improve the efficiency of cash management and reduce transaction costs.

Centralized Bank Account

A single bank account used by a company to manage and control all payments and receipts, simplifying cash management.

Adjustment Costs

Expenses incurred from making changes to a business, such as restructuring operations or relocating facilities.

Marketable Securities

Short-term financial instruments that can be quickly converted into cash at a reasonable price, like stocks and bonds.