Which of the following would not be considered an automatic stabilizer?
A. Defense spending
B. Income tax
C. Welfare payments
D. Unemployment compensation
Answer: A
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What effect would a reduction in the U.S. selling price of Japanese-made cars have on the U.S. demand for American-made cars?
A) No effect, because price changes affect quantity demanded, not demand. B) The demand would decrease. C) The demand would increase. D) We cannot tell unless we know the elasticities of demand for Japanese-made and American-made cars. E) We cannot tell unless we know what happened to the price of American-made cars.
According to the purchasing power parity theory, a rise in the United States price level of 5 percent, and a rise in the Mexican price level of 6 percent cause
A) the dollar to appreciate 1 percent relative to the peso. B) the dollar to depreciate 1 percent relative to the peso. C) the dollar to depreciate 5 percent relative to the peso. D) the dollar to appreciate 5 percent relative to the peso.
Compared to 1929, total output in the U.S. in 2016 was approximately ________ times larger.
A. 5 B. 15 C. 2 D. 25
Government may not have an incentive to correct a market failure because:
A. the benefit of correcting the market failure might exceed the cost of correcting the market failure. B. policy makers fear that intervention will lead to a Pareto optimal outcome. C. government doesn't have the information it needs to correct the market failure. D. government reflects politics, which reflects political pressure to benefit special interest groups.