Automatic stabilizers refer to
A)the Fed's monetary policy rule.
B)the self-adjusting nature of a market economy.
C)the fact that Congress is called into session whenever there is a recession.
D)taxes and government spending that change automatically whenever the state of the economy changes.
E)the tendency for changes in inflation to return the economy to potential GDP.

Question

Quizplus · Accepted Answer

Automatic stabilizers refer to taxes and government spending that change automatically whenever the state of the economy changes. For example, during a recession, government spending on social welfare programs goes up and tax revenues go down due to lower economic activity, which helps to offset the downturn and stabilize the economy.

Automatic Stabilizers Refer to