Consider the following list of government policies. i. welfare programs
ii. student loans
iii. lower income tax rates
iv. progressive income tax rates
v. unemployment compensation
vi. tax credits for research and development
Which are examples of automatic stabilizers?

Question

Consider the following list of government policies. i. welfare programs 
ii. student loans 
iii. lower income tax rates 
iv. progressive income tax rates 
v. unemployment compensation
vi. tax credits for research and development
Which are examples of automatic stabilizers?

Quizplus · Accepted Answer

Automatic stabilizers are government policies that automatically stabilize the economy without any additional actions from the government. Welfare programs and unemployment compensation are examples of automatic stabilizers because they automatically increase during economic downturns, providing more support to those in need. Progressive income tax rates also act as an automatic stabilizer because as incomes decrease during a recession, less tax revenue is collected. Lower income tax rates and tax credits for research and development are not examples of automatic stabilizers as they require additional action from the government to implement. Therefore, the best choice is B as it includes only welfare programs and unemployment compensation, which are automatic stabilizers.

Consider the Following List of Government Policies