Automatic stabilizers
A)increase the problems that lags cause in using fiscal policy as a stabilization tool.
B)are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession.
C)are changes in taxes or government spending that policy makers quickly agree to when the economy goes into recession.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

Automatic stabilizers are policies that are already built into the government's budget or tax code that help to stabilize the economy without requiring policymakers to take any deliberate action. They achieve this by increasing government spending or decreasing taxes when the economy is weak, which helps to boost demand and counteract the recessionary forces. As such, they are designed to operate automatically and do not involve any discretionary action from policymakers. This makes them a useful tool in stabilizing the economy, as they can help to address the problem of lags that often plague discretionary fiscal policy.

Automatic Stabilizers