- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 3. Fiscal Policy
- Subject 4. Fiscal Policy Implementation
CFA Practice Question
Unemployment compensation is ______
A. an automatic stabilizer because it rises as income increases, slowing an economic expansion.
B. an automatic stabilizer because it falls as income increases, slowing an economic expansion.
C. not an automatic stabilizer.
Explanation: Higher income generates higher employment and thus lower unemployment compensation, so aggregate demand does not increase as rapidly as it otherwise would.
User Contributed Comments 1
| User | Comment |
|---|---|
| viannie | unemployment compensation = a form of transfer payment |