Question

Using policy to stabilize the economy The government has the ability to influence the level of output in the short run using monetary and fiscal policy. There is some disagreement as to whether the government should attempt to stabilize the economy. Which of the following statements about the debate over stabilization policy are correct? Check all that apply.
A. Advocates of active stabilization believe that implementation lags for fiscal and monetary policy do not exist.
B. Opponents of active stabilization policy believe that significant time lags in both fiscal and monetary policy often exacerbate economic fluctuations.
C. Advocates of active stabilization believe that automatic stabilizers have no effect on aggregate demand.
C. Advocates of active stabilization policy believe that the government can adjust monetary and fiscal policy to counteract waves of excessive optimism and pessimism among consumers and businesses.
Which of the following are examples of automatic stabilizers? Check all that apply.
A. Corporate income taxes
B. Personal income taxes
C. The federal funds rate.

Answer 1

Answer:B. Opponents of active stabilization policy believe that significant time lag in both fiscal and monetary policy often excercebate economic fluctuations.

C. Advocate of active stabilization policy believe that the government can adjust monetary and fiscal policy to counter waves of excessive optimism and pessimism among consumers and business.

Examples of automatic stabilizer

A. Corporate income taxes

B. Personal income taxes

Explanation:

Stabilization policy helps to stabilize the economy during expansionary or deficit period however a lag in the implementation will surely affect getting the right outputs from the implementation.

The economy has inbuilt stabilizer s that tend to correct excessiveness in economy such as the personal and corporate tax . The federal fund rate will be adjusted as the need be to stabilizer the economy even though it can be used as a stabilizer but it's not an automatic stabilizer.