A big advantage of automatic stabilizers is that they
A)completely eliminate the outside lag
B)do not have any inside lag
C)make the recognition lag negative
D)increase the size of the fiscal policy multiplier
E)make discretionary monetary policy obsolete

Question

Quizplus · Accepted Answer

Automatic stabilizers do not have any inside lag, as they work automatically to stabilize the economy without the need for legislative or administrative actions. However, they may still have recognition and outside lags. Option A is incorrect as automatic stabilizers do not completely eliminate the outside lag, but they can reduce it. Option C is inaccurate as recognition lag is inherent in any stabilization policy, whether automatic or discretionary. Option D is also incorrect as the fiscal policy multiplier is not directly impacted by the presence of automatic stabilizers. Option E is not relevant as automatic stabilizers work alongside discretionary monetary policy rather than rendering it obsolete.

A Big Advantage of Automatic Stabilizers Is That They