Because of automatic stabilizers, when GDP fluctuates the

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Quizplus · Accepted Answer

Automatic stabilizers are government policies that automatically adjust to counterbalance economic fluctuations. When GDP decreases, automatic stabilizers like unemployment insurance and welfare payments increase, which leads to a higher government deficit. Conversely, when GDP increases, automatic stabilizers like corporate tax revenue and personal income tax revenue increase, which leads to a lower government deficit. Therefore, the government's deficit fluctuates inversely with GDP, making choice B the correct answer.

Because of Automatic Stabilizers, When GDP Fluctuates the