Fiscal Policy Can Be Effective

4 important questions on Fiscal Policy Can Be Effective

What do automatic stabilizers do when output and income decline?

They increase government spending or reduce taxes without new political decisions needed.

How do automatic stabilizers function?

These stabilizers are written into law and work automatically.

Why are automatic stabilizers important?

They act as shock absorbers that soften recession automatically.
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What is commonly used for short-run stabilization?

Monetary policy is used because adjustments can be made faster.

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