Auto stabilizer video

What does the horizontal axis represent in the diagram?

• Time

• Real GDP

• Inflation

• Unemployment

What is depicted in dark blue color in the diagram?

• Recession

• Inflation

• Unemployment

• Full employment output

What is the term used for the situation when the economy is above the trend line?

• Negative output gap

• Recession

• Positive output gap

• Stagnation

What type of fiscal policy is implemented when the government takes special action to close an output gap?

• Automatic stabilizers

• Monetary policy

• Supply-side policy

• Discretionary fiscal policy

What are examples of automatic stabilizers?

• Infrastructure spending

• Welfare payments

• Tax cuts

• Interest rates

How do taxes help smooth out fluctuations in the business cycle?

• They remain constant regardless of the economic situation

• They decrease during expansion and increase during recession

• They increase during expansion and decrease during recession

• They have no impact on the business cycle

What happens to welfare payments during a positive output gap?

• They have no impact

• They decrease

• They increase

• They remain constant

What effect do unemployment insurance have during a recession?

• They decrease government spending

• They increase government spending

• They have no impact on government spending

• They lead to inflation

What is the term used for the situation when the economy is below the trend line?

• Stagnation

• Negative output gap

• Inflation

• Positive output gap

What is the term used for the situation when the government is afraid of inflation due to an overheating economy?

• Contractionary fiscal policy

• Expansionary fiscal policy

• Monetary policy

• Supply-side policy