A decrease in taxes will do which of the following in the long run?
a. decrease unemployment
b. increase real output
c. decrease the price level
d. None of the above.
During a recession, total public assistance payments and unemployment compensation payments automatically increase while income taxes automatically decrease. Which of the following best describes the effect of these changes on aggregate demand? Answer
a. Aggregate demand will be the same as it was before the recession.
b. Aggregate demand will be greater than it was before the recession.
c. Aggregate demand will be more than it would be without these automatic stabilizers.
d. Aggregate demand will be less than it would be without these automatic stabilizers.
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