Letting automatic stabilizers fix the deficit rather than us

Letting automatic stabilizers fix the deficit rather than use fiscal policy might be preferred O people know fiscal policy might be temporary. O fiscal policy might raise interest rates. there is little to no time All of the above. QUESTI 10 points Save Answer The period in history when the United States had the highest national debt relative to the size of the economy is/was: today during the 1980s during the Depression. during Wwill. QUESTI 10 points Save Answer The concept of crowding out refers to the idea that: increased government borrowing will make private borrowing more increased borrowing from foreign countries wil increase the current opportunity cost of The Federal Reserve will refuse to lend if the government borrows too State and local governments cannot borrow when the federal government borrows too

Solution

a) Letting automatic stabilizers fix the deficit rather than use fiscal policy might be preferred because people know fiscal policy might be temporary, fiscal policy might raise interest rates and there is little to no time lag. So all above options are correct and option D is right. Automatic stabilizers reduce the chances of frequent ups and downs.

b) The period in history when United States had the highest national debt relative to size of economy was during World War II. So correct option is D. This is because the highest federal debt was after WWII which reached its peak of 119% of GDP in 1946.

c) The concept of crowding out refers to the idea that increased government borrowing will make private borrowing more expensive. So correct option is A. This happens because of increased government spending and deficit financing.