Provisions in the law that imply automatic increases in government spending or decreases in taxes when real output declines are called:
A) autonomous stabilizers.
B) automatic stabilizers.
C) the marginal propensity to consume.
D) the income-expenditure multiplier.

Question

Quizplus · Accepted Answer

provisions in the law that imply automatic increases in government spending or decreases in taxes when real output declines are called automatic stabilizers. These provisions help to stabilize the economy by providing a built-in mechanism for countercyclical fiscal policy. When the economy is in a recession, automatic stabilizers increase government spending and decrease taxes, which helps to increase aggregate demand and stimulate economic growth.

Provisions in the Law That Imply Automatic Increases in Government