Automatic Stabilizers

Question 1

As GDP increases, tax revenue _____ and the unemployment rate generally ______.

Adecreases; decreases

Bincreases; increases

Cdecreases; increases

Dincreases; decreases

Eincreases; stays the same

Question 2

Which of the following accurately describes the relationship between social service programs and the business cycle?

ASocial service programs act completely independently of the business cycle.

BSocial service programs can help with recessions but do not slow inflation.

CSocial service programs can help with inflation but do not alleviate recessions.

DSocial service programs tend to intensify recessions and inflationary periods.

ESocial service programs help alleviate cyclical unemployment and inflation.

Question 3

Increasing tax revenues and falling transfer payments are an automatic response to

Along-term economic growth

Ban inflationary period

Ca recessionary period

Dprice level disequilibrium

Ean aggregate demand decrease

Question 4

Which of the following statements about a progressive income tax structure is accurate?

AIt is the least effective type of automatic stabilizer.

BThe less a person earns, the greater their tax burden.

CThe more a person earns, the greater their tax burden.

DA person can end up making less after taxes after an income increase.

EIt has the tendency to worsen recessionary and inflationary cycles.

Question 5

Which of the following is an example of an automatic stabilizer?

ADiscretionary spending

B A new tax law

CThe multiplier effect

DTime lag

EUnemployment benefits