"Automatic fiscal stabilization" in the economy refers to
A)the properties of government spending and taxation that cause the simple multiplier to be increased.
B)the discretionary fiscal policies that are automatically undertaken by the government when there is a recessionary gap.
C)the properties of government spending and taxation that cause the simple multiplier to be reduced.
D)the discretionary fiscal policies that are automatically undertaken by the government when there is an inflationary gap.
E)all discretionary fiscal policies.

Question

Quizplus · Accepted Answer

Automatic fiscal stabilization refers to how government spending and taxation automatically adjust to economic changes without new legislation, thereby dampening economic fluctuations. This typically reduces the impact of changes in the economy on the aggregate demand, hence reducing the simple multiplier effect.

"Automatic Fiscal Stabilization" in the Economy Refers to