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Safari File Edit View History Bookmarks Window Help Apple Bing Google Yaheo NewsDetals 5% MINDTAP Homework (Ch 34) d Due on Dec 7 at 11 PM CST Keep the Highest: 14/2 Attempts: 1.4 8. Using policy to stabilize the economy The govemment whether the government should attempt to stabilize the economy has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to Which of the folowing statements about the cebate over stabilization policy are correct? Check a that apply. O Advocates of active stabilization policy belleve that the govenment can adjust monetary and fiscal policy to counteract waves of excessive optimism and pessimism among consumers and businesses. Opponents of active stablization believe that active fiscal and monetary policies have no effect on aggregate demand. Opponents of active stabilization policy beieve that spficant time lags in both fiscal and monetary poly often exaertate economic Advocates of active stablization believe that automatic stabilaers have no effect on aggregate demand. Which of the following are examples of automatic stabilizers? Check ad that apply Corporate income taxes Personal income taxes The discount rate 8 7 4 6

Explanation / Answer

8) Fiscal and Monetary polucy are considered effective tools for stabilizing the economy. Advocates say governments can stabilise the markets through stimulating the consumer demand or reducing the pessimism by the use of fiscal and monetary tools. This leads to effect on aggrega Demand. The opponents feel that the effect happens after a lag which generally harms the economy. Opponents agree that it leads to effect on AD but with a lag. Thus statements 1,3,4 are true.

Automatic stabilisers are corporate and personal tax. Automatic stabilizers are so called because they act to stabilize economic cycles and are automatically triggered without explicit government action.

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