If aggregate output is increasing,
A)both b and e
B)tax revenue decreases
C)automatic stabilizers will tend to increase the size of the deficit
D)automatic stabilizers will tend to decrease the size of the deficit
E)transfer payments increase as fewer people become eligible for public assistance

Question

Quizplus · Accepted Answer

Automatic stabilizers, such as progressive income taxes and unemployment benefits, increase government spending and decrease tax revenue during economic downturns. However, as aggregate output increases and the economy grows, tax revenue increases and fewer people rely on government assistance, which tends to decrease the size of the deficit.

If Aggregate Output Is Increasing