If an economy moves into a recession, causing that country to produce less than potential GDP, then:
A. automatic stabilizers will cause tax revenue to decrease and government spending to increase.
B. automatic stabilizers will cause tax revenue to increase and government spending to decrease.
C. tax revenue and government spending will be higher because of automatic stabilizers.
D. tax revenue and government spending will be lower because of automatic stabilizers.
Answer:A
If an economy moves into a recession, causing that country to produce less than potential GDP, then:
A. automatic stabilizers will cause tax revenue to decrease and government spending to increase. B. automatic stabilizers will cause tax revenue to increase and government spending to decrease. C. tax revenue and government spending will be higher because of automatic stabilizers. D. tax revenue and government spending will be lower because of automatic stabilizers.
Explanation: Type: Multiple Choice