When Output Deviates from Potential GDP, Automatic Stabilizers Work to Push

question 102

Multiple Choice

When output deviates from potential GDP, automatic stabilizers work to push the economy:

• A) in the same direction that correctly timed and formulated discretionary policy would.
• B) in the opposite direction that correctly timed and formulated discretionary policy would.
• C) in unpredictable ways, causing a need for discretionary policy.
• D) even further from its long-run equilibrium.

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Definitions:

Cognitive Labeling

The process of identifying and interpreting feelings and emotions by attaching labels to them.

Cognitive-Mediational Theory

Theory of emotion in which a stimulus must be interpreted (appraised) by a person in order to result in a physical response and an emotional reaction.

Emotional Experience

The feelings or reactions to an event that are subjective and can range broadly, including happiness, sadness, anger, or fear.

Interpretation

The act of explaining the meaning of something or presenting one's understanding of a text, concept, or situation.