Automatic stabilizers tend to stabilize the level of economic activity because they
A)Are changed quickly by Congress.
B)Increase the size of the multiplier.
C)Increase spending during recessions and reduce spending during inflationary periods.
D)Control the rate of change in prices.

Question

Quizplus · Accepted Answer

Automatic stabilizers increase government spending during economic recessions, which stimulates aggregate demand and reduces the severity of the recession. Conversely, they reduce government spending during periods of inflation, which helps to control rising prices. By stabilizing government spending in this manner, the economy is less likely to experience large fluctuations in economic activity, which tends to lead to a more stable and predictable economic environment.

Automatic Stabilizers Tend to Stabilize the Level of Economic Activity