Automatic stabilizers lead to changes in taxation and government spending as economic output varies. How do automatic stabilizers impact tax revenue and government spending during a recession?
Tax revenue will:
a. increase
b. not change
c. decrease
and government spending will:
a. increase
b. not change
c. decrease
Suppose that the government is required to balance the budget. Which of the following is an appropriate discretionary approach during a recession and what effect would it have to the economy?
a. Invest in public infrastructure that promotes employment and stimulates the economy.
b. Cut government spending to equal tax revenue possibly magnifying the effects of a recession.
c. Increase government spending to stimulate the economy causing an increase in overall aggregate demand.
d. Cut taxes to encourage consumer spending which would minimize the effects of the recession.
Automatic stabilizers lead to changes in taxation and government spending as economic output varies. How do automatic stabilizers impact tax revenue and government spending during a recession?
Tax revenue will:
a. increase
b. not change
c. decrease
and government spending will:
a. increase
b. not change
c. decrease
Suppose that the government is required to balance the budget. Which of the following is an appropriate discretionary approach during a recession and what effect would it have to the economy?
a. Invest in public infrastructure that promotes employment and stimulates the economy.
b. Cut government spending to equal tax revenue possibly magnifying the effects of a recession.
c. Increase government spending to stimulate the economy causing an increase in overall aggregate demand.
d. Cut taxes to encourage consumer spending which would minimize the effects of the recession.
