If It Were Not for the Automatic Stabilizers in the U.S.economy

question 30

Multiple Choice

If it were not for the automatic stabilizers in the U.S.economy,

• A)the Federal Reserve would have less reason than it has now to monitor stock prices.
• B)it would be more desirable than it is now for the Federal Reserve to target an interest rate.
• C)a strict balanced-budget rule would be more desirable than it is now.
• D)output and employment would probably be more volatile than they are now.

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Definitions:

Inflation

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Price Level

The central value of current prices for each good and service in the economy.

Value of Money

The purchasing power of money, which varies with inflation and economic conditions, indicating how much goods and services money can buy.

Keynesian Economics

An economic theory suggesting that active government intervention in the marketplace and monetary policy is the best method of ensuring economic growth and stability.