Automatic fiscal policy ________
A. requires an action of the government
B. is weak unless the government cuts its outlays to reduce the deficit
C. operates as the economy moves along its business cycle
D. reduces the deficit as the economy goes into recession
C Answer C is essentially the definition of automatic fiscal poli-cy.
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Which of the following determines the quantity demanded of a commodity?
a. The income levels of consumers b. The price of the commodity c. The prices of related commodities d. The number of buyers e. Consumers' expectations
Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C