Automatic stabilizers are so-named because
A) they are automatically undertaken by the Federal Reserve Bank to reduce budget deficits.
B) they occur automatically when real GDP changes.
C) the policy suggestions of the Council of Economic Advisors are automatically followed.
D) the policy suggestions of the Office of Management and Budget are automatically followed.

Question

Quizplus · Accepted Answer

Automatic stabilizers are policies built into the economic system that respond automatically to changes in economic activity without any further government action. Common examples include unemployment insurance and progressive income taxes which automatically increase during a recession as income and employment fall, providing a stabilizing effect on the economy. Therefore, option B is the correct answer.

Automatic Stabilizers Are So-Named Because