객관식
How do you calculate the government spending multiplier?
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19. Fiscal Policy
Government Purchases and the Multiplier Effect
객관식
During a recession, how do automatic stabilizers affect tax revenue and government spending?
A
They decrease both tax revenue and government spending automatically.
B
They decrease tax revenue and increase government spending automatically.
C
They increase tax revenue and decrease government spending automatically.
D
They increase both tax revenue and government spending automatically.
검증된 단계별 안내1
Step 1: Understand what automatic stabilizers are. Automatic stabilizers are economic policies and programs that automatically adjust government spending and taxes in response to economic fluctuations without additional legislative action.
Step 2: During a recession, economic activity slows down, leading to lower incomes and profits. This causes tax revenues to fall automatically because taxes are often based on income and profits.
Step 3: At the same time, government spending increases automatically during a recession because more people become eligible for social safety net programs such as unemployment benefits and welfare.
Step 4: Therefore, automatic stabilizers work by decreasing tax revenue (due to lower incomes) and increasing government spending (due to higher demand for social benefits), which helps to stabilize aggregate demand.
Step 5: Summarize that automatic stabilizers act counter-cyclically: they reduce tax revenue and increase government spending during recessions, helping to cushion the economy from further downturns.
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