etaly and riscl Policy on Aggregate Demand 21 | Back to Due Sunday 12.10.17 at 1

Question

etaly and riscl Policy on Aggregate Demand 21 | Back to Due Sunday 12.10.17 at 11:45 PM Keep the Highest: 2 8. Using policy to stabilize the economy The government has the abity to influence the level of output in the short run using monetary and fiscal policy. There is 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. O Shifts in aggregate demand are often the result of waves of pessimism or optimism among consumers and businesses. U The current tax system acts as an automatic stabilizer. The Fed can effectively respond to excessive pessimism by expanding the money supply and lowering interest rates. Changes in government purchases and taxation must be passed by both houses of Congress and signed by the president. Which of the following are examples of automatic stabilizers? Check all that apply

Explanation / Answer

Answer 1:-

Arguments in favour of active stablization policy:-

These arguments support stablization policy as if the govt can in short run take out the economy from financial unstability arising out of just waves of pessimism and optimism then it should. As it will maintain stability in the economy.

Answer 2:-

Examples of automatic stablizers:-

These are called automatic suppliers because they are designed to set off economic flutuations by themselves without the individual intervention of govt in each case. Automatic stablizers are policies that can stablize the business cycle without the intervention of the govt.

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