Political Business Cycles Result

question 3

Multiple Choice

Political business cycles result:

• A)from the economic fluctuations that occur when discretionary policy is manipulated for political gain.
• B)from the recessionary gap that occurs when output falls short of the economy's potential.
• C)from the expansionary gap that occurs when output exceeds the economy's potential.
• D)when the spending multiplier is manipulated for political gain.
• E)from the economic fluctuations that occur when automatic stabilizers are manipulated for political gain.

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Definitions:

Behavioral Economists

Economists who study the psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions.

Precommitments

Actions taken ahead of time that make it difficult for the future self to avoid doing what the present self desires. See time inconsistency and self-control problems.

Self-Control Problems

Self-control problems refer to situations where individuals struggle to resist short-term temptations in order to achieve long-term goals, often leading to impulsive behavior.

Time Inconsistency

The tendency for a person or group to change their plan or perspective over time in ways that can be counterproductive.