Because automatic stabilizers exist in the United States economy
A. during a recession, transfer payments automatically rise and tax revenue drops; during a period of economic recovery, transfer payments fall and tax revenue rises.
B. real wages automatically adjust to keep the labor force fully employed at all stages of the business cycle.
C. monetary policy is designed to automatically respond to changes in money demand.
D. during a recession, the government's budget deficit automatically becomes smaller.
E. All of the choices/statements are true.
A. during a recession, transfer payments automatically rise and tax revenue drops; during a period of economic recovery, transfer payments fall and tax revenue rises.
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Suppose a farmer raising beef is making a normal profit. Then, because of a scare about mad cow disease, the demand for beef decreases drastically. What happens to the profits of the beef farmer in the short run and in the long run?
What will be an ideal response?
When two goods have negative cross elasticities of demand and negative income elasticities, they are: a. Normal and substitutes
b. Normal and complements. c. Inferior and substitutes. d. Inferior and complements.
Economists agree that at least in the short run disinflation
a. leads to a period of higher unemployment. They also agree that the costs of even moderate inflation is high. b. leads to a period of higher unemployment. They disagree about the cost of moderate inflation. c. leads to a period of lower unemployment. They also agree that the cost of even moderate inflation is high. d. leads to a period of lower unemployment. They disagree about the cost of moderate inflation.
Which of the following is NOT a reason why there are gains to specialization?
A. It further improves skills through experience and practice. B. It allows individuals to concentrate on the activities in which they have a comparative advantage. C. It eliminates many of the costs of switching from one task to another. D. It increases the amount productive resources in the economy.