Automatic Stabilizers- Macro Topic 3.9

What are the two main components of fiscal policy?

• Government spending and taxes

• Interest rates and inflation

• Monetary supply and demand

• Exports and imports

Which of the following is an example of a non-discretionary fiscal policy?

• New tax legislation

• Infrastructure spending

• Unemployment benefits

• Defense budget increase

How does the progressive tax system function during economic growth?

• It reduces taxes for the poor

• It remains constant for all income levels

• It increases taxes for the wealthy

• It decreases taxes for everyone

What action might the government take during a recession under discretionary fiscal policy?

• Increase taxes

• Increase interest rates

• Decrease government spending

• Decrease taxes

What is the goal of increasing government spending during a recession?

• To increase aggregate demand

• To reduce inflation

• To lower interest rates

• To decrease aggregate demand