Which of the following is an example of an automatic stabilizer during a recession?
A) A decrease in tax revenue due to an increase in unemployment
B) A decrease in inflation due to an increase in consumption
C) An increase in interest rates due to a decrease in investment
D) An increase in money supply due to a decrease in bank deposits

Question

Quizplus · Accepted Answer

During a recession, there is often an increase in unemployment, which leads to a decrease in tax revenue. This decrease in tax revenue acts as an automatic stabilizer because it helps to mitigate the impact of the recession by providing additional funds to individuals and businesses that may otherwise have less income or revenue.

Which of the Following Is an Example of an Automatic