If the deficit is increasing because of the effects of automatic stabilizers, _____
A) the budget is annually balanced.
B) the economy is contracting.
C) the annual budget deficit has approached zero.
D) the budget is cyclically balanced.
E) the economy is growing.

Question

Quizplus · Accepted Answer

Automatic stabilizers are policies and programs that automatically increase government spending or decrease taxes in response to a contraction in the economy. When this happens, the deficit increases because there is less revenue coming in and more money going out. Therefore, an increasing deficit due to automatic stabilizers suggests that the economy is contracting.

If the Deficit Is Increasing Because of the Effects of Automatic