Category: Economics

Question 16 of 16
now do automatic stabilizers impact tax revenue and government spending during a recession? Tax revenue ◻ and government spending ◻ does not change increases decreases
Tax revenue
does not change
increases
decreases
Government spending
does not change
increases
decreases

➤ How did investments in developing countries affect globalization during that era?
Investment increased through foreign direct investment, portfolio capital, and policy reforms. Multinationals established manufacturing and export platforms in lower‑cost locations. These investments, together with liberalized capital markets and digital coordination tools, helped create integrated global value chains and expand trade links between developed and developing economies.

➤ What are the trade-offs between increasing government purchases and cutting taxes?
Increasing government purchases directly raises AD through public spending and often has a larger immediate multiplier. Cutting taxes leaves the spending decision to households, which can reduce its immediate effect. Trade-offs include timing, administrative ease, potential crowding out of private investment, and the effect on the fiscal deficit and long‑term debt.

➤ When do governments use transfer payments and spending as fiscal tools?
Governments boost transfer payments and public spending during recessions to support incomes, maintain demand, and stabilize employment. Transfer payments act as automatic stabilizers, while discretionary spending—like infrastructure projects—delivers targeted stimulus. In expansions, policymakers may curb spending or raise taxes to control inflation and rebuild fiscal buffers.

➤ When can a country reach zero population growth despite high fertility?
It is uncommon for zero growth to occur with persistently high fertility, but heavy emigration can temporarily offset births. More typically, declines in fertility from development, contraception access, female education, and urbanization lead to zero growth. Population momentum may still cause growth for decades after fertility falls to replacement levels.

A fast solution to skill shortages in U.S. labor markets can occur through changes in the policy—for example, by increasing the quota for foreign software engineers in the United States.

In a monopoly the supplier can artificially restrain supply of a desired or needed product or service and create an increase in price not driven by competitive supply and demand.TrueFalse
Choose an answer
True
False