Government transfer payments rise when the economy is contracting and fall when the economy is expanding. In this role, transfer payments are described as:

Question

Quizplus · Accepted Answer

Automatic stabilizers are government policies that automatically stabilize economic activity during economic downturns without any additional government actions. Transfer payments are one example of automatic stabilizers because they increase during a recession, providing additional income support to individuals and families who may be struggling financially.

Government Transfer Payments Rise When the Economy Is Contracting and Fall