Automatic stabilizers act to ______ government expenditures and _______ government revenue during an expansionary period?
Correct answer: B. decrease; increase
- A. increase; increase
- B. decrease; increase
- C. increase; decrease
- D. decrease; decrease
Explanation
During expansion, unemployment-related benefits and similar government expenditures fall, while tax revenue rises as incomes and profits increase. These automatic changes reduce aggregate demand pressure without new legislation.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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