Unemployment insurance payments act as automatic stabilizers by:
a. allowing for more consumer spending during prosperity.
b. making the unemployment rate worse during a recession.
c. allowing for more consumer spending during a recession.
d. changing the Phillips curve to a Laffer curve.
b
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Suppose a new vaccine for Lyme disease is developed by Merck, a large drug company. Which of the following is most likely to occur?
A) Merck will apply for a patent on the vaccine that grants it the monopoly rights to the vaccine for many years. B) Merck will have a monopoly on this vaccine because of economies of scale. C) Other firms will quickly copy the formula making the market for the vaccine competitive. D) Merck will not tell anyone about its discovery though it will sell the vaccine.
In early 2008, the housing crisis and rising oil prices increased the risk of recession in the United States. What fiscal policy action was taken by Congress and the president to counter these events?
A) Income taxes were raised to reduce the federal budget deficit and reduce interest rates. B) Taxpayers were given rebates on taxes they already paid. C) There was an increase in government spending on defense and unemployment compensation. D) The Federal Reserve cut its target for the federal funds rate.
The balance sheet for a commercial bank shows the bank's:
a. required reserves as assets and excess reserves as liabilities. b. loans as assets and required reserves as liabilities. c. loans as assets and checkable deposits as liabilities. d. checkable deposits as assets and loans as liabilities. e. excess reserves as assets and required reserves as liabilities.
Figure 8-1
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Based on the scatter diagram in Figure 8-1, approximately how much will consumption increase after a permanent tax cut of $400 billion?
A. $100 billion B. $150 billion C. $250 billion D. $350 billion