CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

Which of the following is an example of an automatic stabilizer?

I. An increase in defense spending during an expansion
II. A decrease in social security benefits during a recession
III. An increase in welfare benefits during an expansion
IV. A decrease in unemployment benefits paid out during an expansion
V. An increase in taxes during a recession
Correct Answer: IV

An automatic stabilizer decreases spending during an expansion and increases spending during a contraction. These actions happen automatically, such as an increase in tax collections during an expansion.

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