All of the following could be considered automatic stabilizers except:
A) transfer payments that increase during recessions.
B) discretionary changes in taxes.
C) a system of unemployment insurance.
D) the federal income tax.

Question

Quizplus · Accepted Answer

Automatic stabilizers are government programs or policies that automatically adjust to smooth out economic cycles, without explicit government intervention. Transfer payments that increase during recessions (A) and unemployment insurance (C) are both examples of automatic stabilizers because they increase during downturns to provide support to those who are suffering from job losses or reduced income. The federal income tax (D) can also act as an automatic stabilizer because it is a progressive tax, meaning that as income falls during a recession, so do tax revenues. Discretionary changes in taxes (B) are not considered automatic stabilizers because they require intentional government action rather than automatically adjusting to the state of the economy.

All of the Following Could Be Considered Automatic Stabilizers Except