Question

An example of automatic fiscal policy is A. a change in taxes that has no multiplier effect. B. the Federal Reserve reducing interest rates as economic growth slows. C. expenditure for unemployment compensation increasing as economic growth slows. D. the federal government expanding spending at the Department of Education. E. Congress passing a tax rate reduction package.

Answer 1

Answer:

c. Expenditure for unemployment compensation increasing as economic growth slows

Explanation:

Automated Fiscal Policy is the name given to government actions designed to adjust its spending levels, thus monitoring and influencing a country's economy. In the various economics manuals, fiscal policy is closely linked to monetary policy, and it can be stated, in quite simplistic terms, that the two economic policies are like sisters, since both seek to influence one aspect of the economy: monetary policy will change the currency behavior, and fiscal policy will operate against state spending. Every government will invariably use both policies in various combinations and ranks in an effort to guide a country's economic goals.

Within the options given in the question, an example of an automatic tax policy is "C.  expenditure for unemployment compensation increasing as economic growth slows. "