The effect of changes in economic activity on the budget deficit is called:
A) automatic stabiliser.
B) debt monetisation.
C) tax smoothing.
D) fine tuning.
E) the structural deficit.

Question

Quizplus · Accepted Answer

Changes in economic activity can have a direct impact on government revenues and expenditures, which can in turn affect the budget deficit. Automatic stabilizers are mechanisms built into a country's fiscal policy that help to stabilize economic fluctuations by automatically adjusting government spending and taxation in response to changes in economic activity. These stabilizers help to mitigate the impact of economic shocks on the budget deficit.

The Effect of Changes in Economic Activity on the Budget