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Basic Question 6 of 11
Which of the following is an example of an automatic stabilizer?
B. The reduction in real wages that occurs as the economy goes into a recession
C. The increase in government spending that occurs as the result of new spending bills passed by Congress
D. The rise in tax revenue that occurs as a result of growth in real GDP
A. The reduction in the money supply that occurs as banks become less willing to make loans during a recession
B. The reduction in real wages that occurs as the economy goes into a recession
C. The increase in government spending that occurs as the result of new spending bills passed by Congress
D. The rise in tax revenue that occurs as a result of growth in real GDP
User Contributed Comments 4
| User | Comment |
|---|---|
| danlan | since automatic stabilizer does not require any change in money supply or government spending or fiscal policy change, their effects are caused by the result of output (real GDP). |
| MattyBo | Tax rate remains the same because tax law is set. Tax revenue automatically increases because of growing real GDP. |
| thekid | 2 consecutive quarter Real GDP decrease leads to a recession and as Real GDP falls so does the real wages. So don't understand why 'b' is not a correct answer as well. |
| YOUCANDOIT | B is not correct b/c it is not stabilizing the economy. it is tricky since B is neither discretionary or automatic fiscal policy. |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
explain the implementation of fiscal policy and difficulties of implementation as well as whether a fiscal policy is expansionary or contractionary
CFA® 2024 Level I Curriculum, Volume 1, Module 3.