An Increase in the Volatility of GDP Increases the Probability

question 69

Multiple Choice

An increase in the volatility of GDP increases the probability of default because:

• A) it increases political tension and there is a big turnover in government officials who don't know how to run the financial system.
• B) automatic stabilizers kick in and increase spending when GDP is lower, taking money away from repaying debt.
• C) tax receipts are erratic and government is not good at coming up with payments when they are due.
• D) there is still only one potential real GDP level but many more possibilities below potential real GDP, thus a higher likelihood of default.

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Definitions:

Genetics

The study of heredity, or how characteristics of organisms are transmitted from one generation to the next.

Environment

The surrounding or conditions in which an organism lives or operates, encompassing both natural and artificial elements.

Evolutionary Change

A process through which the genetic makeup of a population changes over generations, driven by mechanisms such as natural selection, mutation, gene flow, and genetic drift.

Selection

The process by which certain traits become more or less common in a population due to their impact on the survival and reproduction of their carriers.