Title: QUIZ: GDP: Policy Module
Course: Recommended Resources for AP Macro from FRE > Section: Unit 2: Economic Indicators and the Business Cycle

Q: If the growth of real GDP is sluggish—that is, below trend—what might policymakers choose to do to stimulate the economy?
- Increase taxes
- Increase the money supply
- Decrease the money supply
- Decrease government spending
A: Increase the money supply
If right: That is correct!
If wrong: That is incorrect. If the growth of real GDP is sluggish—that is, below trend—policymakers could increase the money supply to stimulate the economy.

Q: What is an automatic stabilizer?
- Provisions by the Federal Reserve that change the money supply
- Provisions by the Federal Reserve that change government spending or taxation
- Provisions in a government’s budget that cause government spending to rise (fall) or taxes to fall (rise) automatically without legislation when GDP falls (rises)
- Provisions in the government’s budget that cause government spending to rise (fall) or taxes to fall (rise) and that occur because of legislation intended to stabilize the economy
A: Provisions in a government’s budget that cause government spending to rise (fall) or taxes to fall (rise) automatically without legislation when GDP falls (rises)
If right: That is correct!
If wrong: That is incorrect. Automatic stabilizers are provisions in a government’s budget that cause government spending to rise (fall) or taxes to fall (rise) automatically without legislation when the GDP falls (rises).

Q: Which of the following is an example of an automatic stabilizer?
- Unemployment insurance
- Medicare
- Social Security
- Transportation funding
A: Unemployment insurance
If right: That is correct!
If wrong: That is incorrect. When the economy goes into a recession and unemployment rises, more people are eligible for unemployment insurance payments. These are paid without any action by Congress.