AP Macroeconomics : How to find effects on employment

Study concepts, example questions & explanations for AP Macroeconomics

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Example Questions

Example Question #1 : How To Find Effects On Employment

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

Possible Answers:

Corporate layoffs

Expansionary monetary policy by a Central Bank

Unemployment insurance

Deficit spending by governments

Correct answer:

Unemployment insurance

Explanation:

Unemployment insurance is an example of an automatic stabilizer. An automatic stabilizer is something that stabilizes real economic output in the event of recession. Because unemployment insurance gives workers that have been laid off some money, it is considered an automatic stabilizer, because it lessens the damage that laying these workers off will have on the consumption component of GDP. 

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