Automatic stabilizers

Question

Quizplus · Accepted Answer

Automatic stabilizers are pre-programmed features of the economy that activate in response to certain economic conditions, such as a recession. These stabilizers require no additional action or decision-making from Congress or the White House, as they are built into the system. Examples of automatic stabilizers include unemployment benefits and progressive income taxes, which increase during economic downturns and help to stabilize the economy without the need for explicit policy actions. Option A is incorrect, as automatic stabilizers do not require explicit actions from policy makers. Option C is incorrect, as automatic stabilizers aim to stabilize the economy and reduce fluctuations, rather than magnify them. Option D is incorrect, as automatic stabilizers generally involve decreasing taxes or increasing spending to stimulate the economy during a recession, rather than increasing taxes.

Automatic Stabilizers