Which of the following is an example of an automatic stabilizer? When the economy goes into a recession, a. more people become eligible for unemployment insurance benefits. b. stock prices decline, particularly for firms in cyclical industries. c. Congress begins hearings about a possible stimulus package. d. the Federal Reserve changes its target for the federal funds rate.

Which of the following is NOT an automatic stabilizer? A. income taxes B. unemployment insurance C. Medicaid D. food stamps E. monetary policy

Suppose a wave of negative "animal spirits" overruns the economy, and people become pessimistic about the future. To stabilize aggregate demand, the Fed could$\underline{\phantom{\text{justtexttekst}}}$ its target for the federal funds rate or Congress could$\underline{\phantom{\text{justtexttekst}}}$ taxes.

a. increase; increase

b. increase; decrease

c. decrease; increase

d. decrease; decrease

Example of an automatic stabilizer.

Suppose a wave of negative "animal spirits" overruns the economy, and people become pessimistic about the future. To stabilize aggregate demand, the Fed could$\underline{\phantom{\text{justtextsetekst}}}$ its target for the federal funds rate or Congress could$\underline{\phantom{\text{justtextsetekst}}}$ taxes.

a. increase; increase

b. increase; decrease

c. decrease; increase

d. decrease; decrease

Suppose a wave of negative "animal spirits" overruns the economy, and people become pessimistic about the future. To stabilize aggregate demand, the Fed could ______ its target for the federal funds rate or Congress could ______ taxes.

a. increase; increase

b. increase; decrease

c. decrease; increase

d. decrease; decrease

Hyperinflations occur when the government runs a large budget ______, which the central bank finances with a substantial monetary ______. a. deficit, contraction b. deficit, expansion c. surplus, contraction d. surplus, expansion

An increase in the aggregate demand for goods and services has a larger impact on output ______ and a larger impact on the price level _______. a. in the short run, in the long run b. in the long run, in the short run c. in the short run, also in the short run d. in the long run, also in the long run

When an adverse supply shock shifts the short-run aggregate-supply curve to the left, it also a. moves the economy along the short-run Phillips curve to a point with higher inflation and lower unemployment. b. moves the economy along the short-run Phillips curve to a point with lower inflation and higher unemployment. c. shifts the short-run Phillips curve to the right. d. shifts the short-run Phillips curve to the left.

If a central bank uses the tools of monetary policy to reduce the demand for goods and services, the likely result is$\underline{\phantom{\text{justtextsetekst}}}$ inflation and$\underline{\phantom{\text{justtextsetekst}}}$ unemployment in the short run.

a. Iower; lower

b. Iower; higher

c. higher; higher

d. higher; lower

In June 2005, claims for unemployment insurance in Illinois from construction workers made up about 14 percent of all claims. In December 2005, they made up about 21 percent. Why might more construction workers file for unemployment benefits in December than in June? What type of unemployment best explains the difference?

Give an example of a government policy that acts as an automatic stabilizer. Explain why the policy has this effect.

Why is the unemployment insurance program an example of an automatic stabilizer for the economy?

___________ is an example of an automatic stabilizer.