Using policy to stabilize the economy

7. Using policy to stabilize the economy The government possesses the tools necessary to influence the output level in the short run through use of monetary and scal policy. However, there is some debate regarding whether the government should attempt to stabilize the economy. Which of the following are arguments in favor of active stabilization policy by the government? Check all that apply, C] The current tax system acts as an automatic stabilizer. Cl Shifts in aggregate demand are oen the result of waves of pessimism or optimism among consumers and businesses. U Changes in government purchases and taxation must be passed by both houses of Congress and signed by the president. D The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. Which of me following policies are examples of automatic stabilizers? Check ail that apply. D The federal funds rate C] Corporate income taxes [:1 Personal income taxes