The advantage of automatic stabilizers is that they
A) help to balance the budget.
B) reduce the size of the net public debt.
C) reduce the fluctuations in the business cycle.
D) help reduce the inflation rate.

Question

Quizplus · Accepted Answer

Automatic stabilizers help to reduce fluctuations in the business cycle by automatically adjusting government spending and taxation in response to changes in economic conditions. This helps to stabilize the economy without the need for discretionary policy interventions, which can be slower to implement and less effective in addressing economic shocks. Automatic stabilizers do not necessarily balance the budget or reduce the size of the public debt, and their impact on inflation depends on how they are designed and implemented.

The Advantage of Automatic Stabilizers Is That They