PLEASE HELP. What would i put for the answer. 1.In a recession, the automatic st
ID: 1222862 • Letter: P
Question
PLEASE HELP. What would i put for the answer.
1.In a recession, the automatic stabilizers that are part of federal budget expenditures will ________ and thereby serve to offset ________ in other components of ________.
Increase, declines, AD
Decrease, declines, AS
Increase, increases, AD
Decrease, declines, AD
A decline in the structural deficit is generally a sign that fiscal policy:
is working to stimulate AD.
is working to restrain AD.
is having no effect on AD.
is turning into monetary policy.
3.
If the national debt/GDP ratio exceeds 100%, the rate of growth in the economy will decline.
True
False
Increase, declines, AD
Decrease, declines, AS
Increase, increases, AD
Decrease, declines, AD
Explanation / Answer
Answer 1:
Option A.
During recession, Aggregate demand is less than the full employment level of aggregate demand in the economy. The automatic stabilizers will work in the direction of improving or increasing AD in the times of recession so that it moves towards full employment level.
Thus, automatic stabilizers will increase to offset the decrease in other components of AD.
Answer 2:
Option A.
Structural deficit occurs when the economy is facing the problem of structural deficit and aggregate demand falls to a very low level below the full employment level of GDP. If this deficit is declining, it implies that aggregate demand is increasing to cover the recessionary gap.
Answer 3:
This is a true statement. If the debt to GDP ratio increases beyond 100 per cent, National debt will exceed GDP level of the economy. Thus, burden of debt on the present as well as future generations will rise. This will lead to excess of interest payment and decline in the country's capital expenditure important in determining growth rate of the economy.
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