aq25Feb1 - policy. 2. Which of the following is NOT an...

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25 February 1. An “automatic stabilizer” is: a. a fin-like thing below the water line on a ship which stops it rocking. It is, but that is in another context and not the answer wanted. b. A feature of government tax and expenditure structures which makes [G – T] larger when real GDP is smaller. This is right. If GDP gets smaller, net tax revenues also get smaller, but G is not expected to change. So if we subtract a smaller T from the same G, [G – T] gets larger. c. A feature of government tax and expenditure structures which makes [G – T] smaller when real GDP is smaller. d. The tendency of congress to react to changes in growth by changing fiscal
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Unformatted text preview: policy. 2. Which of the following is NOT an automatic stabilizer? a. A progressive income tax. That is; tax collections will increase when GDP does. b. Unemployment compensation. That is, unemployment compensation payments will increase when GDP and employment decrease. c. Property taxes. They are not an automatic stabilizer, because there is no reason for them to change when GDP does – they depend on property values. d. Sales and excise taxes. They are; when GDP increases, consumption expenditure increases, so sales and excise tax collections increase....
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This note was uploaded on 05/22/2011 for the course ECO 2013 taught by Professor Denslow during the Spring '05 term at University of Florida.

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