Which of the following is an example of amplifying feedback?
When consumption rises, investment goes up; when investment rises, consumption increases. The temperature rises as the furnace runs; as the temperature rises, the furnace turns off. When less gasoline is available, the price rises; when price rises, people use less gasoline. When Joe studies more, he gets higher test scores; as he gets higher test scores, he studies less.
Keynesian economics says that higher taxes reduce total spending. Suppose a country enters a recession and as a result tax receipts fall. Of the following possibilities, which would Keynesian economics recommend?
Raise taxes to produce a surplus Raise taxes to balance the budget Leave taxes alone but cut spending enough to balance the budget. Do nothing; the reduction in taxes caused by recession is an automatic stabilizer.
