Automatic stabilizers create ________ during recessions from increased government spending on welfare and unemployment insurance, and reduced tax revenues, and create _________ during peak growth periods of the economy from reduced government welfare spending and increased tax revenues.
A) fiscal stimulus, fiscal contraction
B) fiscal stimulus, fiscal stimulus
C) fiscal contraction, fiscal stimulus
D) fiscal contraction, fiscal contraction

Question

Quizplus · Accepted Answer

Automatic stabilizers automatically increase government spending and decrease tax revenues during recessions, acting as a fiscal stimulus, and decrease government spending and increase tax revenues during economic booms, acting as a fiscal contraction.

Automatic Stabilizers Create ________ During Recessions from Increased Government Spending