Automatic stabilizers
A)Are included in discretionary fiscal spending.
B)Cause spending to decrease during a recession.
C)Help to moderate the extremes of the business cycle.
D)Are zero at full employment.

Question

Quizplus · Accepted Answer

Automatic stabilizers are government programs and policies that help to moderate the extremes of the business cycle without any action needed from policymakers. They work counter-cyclically, meaning they increase during a recession and decrease during an expansion. Examples of automatic stabilizers include unemployment insurance, progressive income taxes, and social welfare programs. They are not discretionary fiscal spending and are not zero at full employment, making choices A and D incorrect. Choice B is incorrect because automatic stabilizers lead to an increase in spending during a recession, not a decrease.

Automatic Stabilizers