When output deviates from potential GDP, automatic stabilizers work to push the economy:
A. in unpredictable ways, causing a need for discretionary policy.
B. in the same direction that correctly timed and formulated discretionary policy would.
C. in the opposite direction that correctly timed and formulated discretionary policy would.
D. even further from its long-run equilibrium.
Answer: B
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What will be an ideal response?
It is difficult to determine if foreign companies are selling their products for prices below their costs of production because
A) the true costs of production are difficult to calculate. B) the firms have no legal obligation to reveal this information. C) costs are calculated in the firms' local currencies. D) domestic taxes increase the firms' costs but it is difficult to determine the incidence of these taxes.