CFA Practice Question

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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.

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User Comment
viannie unemployment compensation = a form of transfer payment
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