Which of these statements about automatic stabilisers is true? a) They eliminate the fluctuations associated with the business cycle b) They form part of discretionary fiscal policy c) They come into play as soon as aggregate demand fluctuates d) They eliminate fiscal drag

Because of the timing problems of discretionary fiscal Keynesian policy economists favor instituting automatic stabilizers which once established effect the economy without additional government action, producing a government deficit automatically in a recession and generate budget surpluses in expansions. Which of the following would act as automatic stabilizers? a) Progressive income tax b)  Infrastructure investment c)The minimum wage d)Negative income tax (e) (a) and (d) only

supply equation is Y - Ypot + 80 (P-Pe), where Ypot is the potential level of output. In 2016, the population was 400 million, and the structure of the economy was described by the following equations for household consumption behavior and taxes received: C = 100+ 0.8DI, and T = 0. where all monetary values are in billions of dollars. Government spending was fixed at $1700 billion, and firm's investment behavior was fixed at $800 billion. Trading is allowed in this economy and in 2016, trading occurred such that the trade account was balanced. That is, net exports (X-IM) was equal to zero. (Question 15 of 20) Now consider that in in the following year (2017), the government decided to implement a policy aimed at moving the economy to full employment. In its decision to move the economy to full employment, they used government spending as the policy tool. The structure and fixed spending behaviors remain the same as they were in 2016, except for government spending. In addition, changes…

The recent economic recession was brought about by the Covid-19 pandemic. The pandemic brought along mitigation efforts such as stay-at home/shelter in place orders, cancelling of large gathering, social distancing, etc,. What impact have these mitiation efforts likely had on the MPC and the multiplier in the U.S. economy? What does this imply about the effectiveness and level of fiscal policy needed to bring the U.S. economy out of the recession.