The existence of automatic stabilizers will
A) cause the effects of shocks to aggregate demand to have a larger effect on GDP.
B) reduce the recognition lag of discretionary fiscal policy.
C) eliminate recessions.
D) reduce the size of recessionary and inflationary gaps.
D
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A private good:
A. is a good for which consumption involves perfect rivalry. B. is nonexcludable. C. is often provided by the government. D. is a good for which consumption involves perfect rivalry and is nonexcludable.
Refer to Figure 10.3. If full-employment GDP is $500 billion and the economy is on AD0,
A. An inflationary gap exists, and AD must decrease by less than $100 billion to eliminate it. B. A recessionary gap exists, and AD must increase by more than $100 billion to eliminate it. C. An inflationary gap exists, and AD must decrease by more than $100 billion to eliminate it. D. An inflationary gap exists, and AD must increase by $100 billion to eliminate it.