Explain the two stabilization policies politicians use to smooth business cycles
Please provide the best answer for the statement.
The government uses fiscal and monetary policy to smooth the economy over business cycles. Fiscal policy uses changes in tax rates and spending levels to offset periods of expansion and recession. For example, in a period of recession the government can stimulate the economy by cutting taxes or increasing government spending. Monetary policy uses changes in the interest rates to smooth the economy over business cycles. During a recession a lower interest rate can stimulate investment spending by encouraging businesses and individuals to purchase capital goods such as houses, appliances, and machinery. Both work together to help smooth the economy during times of recession and expansion.
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An increase in nominal GDP could result from an increase in
i. production. ii. prices. iii. subsidies. A) i only B) ii only C) i and ii D) i and iii E) i, ii, and iii
During the Civil War years,
a. the slight stimulus to manufacturing was startling. b. iron production for both small arms and railroads increased rapidly. c. production of boots and shoes in Massachusetts nearly doubled. d. Both b and c are correct.
Over time, the wealth of society increases and payments technologies get more efficient. What is the effect on money demand of these two changes?
A. Money demand rises proportionately to the rise in wealth. B. The overall effect is ambiguous. C. Money demand rises, but less than proportionately to the rise in wealth. D. Money demand declines.
People in other countries want to hold U.S. dollars as a
A. standard of deferred payment. B. unit of account. C. medium of exchange. D. store of value.