How are automatic stabilizers different from discretionary fiscal policies?
Amounts of government spending and taxes can change for two broad sets of reasons. First, spending and taxes can change as a result of direct government action, known as discretionary fiscal policy, which occurs when the government passes a new law that explicitly changes tax or spending levels. However, a second type of taxing and spending change happens automatically, without the need for any new laws at all. These changes in tax and spending levels are called automatic stabilizers because they have the effect of stimulating aggregate demand in a recession and holding down aggregate demand in a potentially inflationary boom, but without the passage of any new laws.
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Refer to the figure above. How many units of Good X will be demanded if the government sets a price ceiling of Pc on the good?
A) 0 units B) 10 units C) 25 units D) 35 units
According to the fundamental identity of national income accounting, income and output are identical. Why, then, is national income not equal to GDP?
What will be an ideal response?
Other things the same if reserve requirements are decreased, the reserve ratio
a. decreases, the money multiplier increases, and the money supply decreases. b. increases, the money multiplier increases, and the money supply increases. c. decreases, the money multiplier increases, and the money supply increases. d. increases, the money multiplier increases, and the money supply decreases.
How is monopolistic competition similar to perfect competition?
a. Both have market power. b. Both have easy entry and exit. c. Both have few sellers. d. Both have differentiated products.