______________ are changes in federal taxes and government purchases that are intended to achieve macroeconomic policy goals, and ______________ are changes in federal taxes and government spending that respond to the Business Cycle without direct government action.

Question

BlackTom AI · Accepted Answer

The question asks to identify two paired concepts describing different types of changes in fiscal activity and their relation to macroeconomic goals and the business cycle.
Option 1: Monetary policy / Fiscal policy. Here, the first term is incorrect for the blank about policy changes aimed at macroeconomic goals; monetary policy involves the central bank, not the federal government’s fiscal actions. The second term, fiscal policy, would also not fit the clause about automatic, cycle-responsive actions, so this pairing is not supported by standard definitions.
Option 2: Fiscal policy / Automatic stabilizers. This matches the idea that changes in federal taxes and government purchases intended to achieve macroeconomic policy goals are enacted by the government (fiscal policy). The second blank correctly references automatic stabilizers, which are changes in government spending and taxes that automatically respond to economic fluctuations without new government action, aligning with the business cycle concept described. This option aligns with core economic terminology.
Option 3: Fiscal policy / Monetary Policy. While the first blank is correct as fiscal policy, the second blank incorrectly pairs automatic stabilizers with monetary policy. Monetary policy is conducted by the central bank and involves interest rates and money supply, not automatic stabilizers, so this option inaccurately pairs the concepts.
Option 4: Fiscal policy / Countercyclical policy. The first term is acceptable, but the second term—countercyclical policy—describes a broader idea of policies that counteract the business cycle, which can include discretionary actions. Automatic stabilizers, by contrast, operate automatically without deliberate policy changes, making this pairing inaccurate for the description given.
In summary, Option 2 correctly captures both ideas: deliberate fiscal policy actions aimed at macro goals, and automatic stabilizers that respond to the business cycle without new government action. The other options mix incorrect first or second terms or misinterpret the nature of automatic stabilizers versus discretionary policy measures.

ECON 2002.01 AU2025 (21333) Final Exam- Requires Respondus LockDown Browser

are changes in federal taxes and government purchases that are intended to achieve macroeconomic policy goals, and are changes in federal taxes and government spending that respond to the Business Cycle without direct government action.

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