Automatic stabilizers reduce the size of economic fluctuations since they
A)affect aggregate demand and aggregate supply at the same time
B)reduce the outside lag to practically zero
C)reduce the recognition lag to practically zero
D)reduce the fiscal policy multiplier to 1
E)ensure that disposable income falls by less than income after a disturbance

Question

Quizplus · Accepted Answer

Automatic stabilizers, such as unemployment benefits and progressive taxation, help to cushion the blow of economic downturns by ensuring that people's disposable income does not fall as much as their actual income, thereby stabilizing consumption and demand.

Automatic Stabilizers Reduce the Size of Economic Fluctuations Since They