Automatic fiscal stabilizers are most helpful in
A)making discretionary fiscal policy effective.
B)reducing the intensity of business cycles.
C)removing persistent output gaps.
D)promoting economic growth.
E)eliminating price fluctuations in the economy.

Question

Quizplus · Accepted Answer

Automatic fiscal stabilizers, such as unemployment insurance and progressive income taxes, work automatically to provide a stabilizing force on the economy during fluctuations in economic activity. They help to reduce the intensity of business cycles by increasing government spending and transfer payments during recessions, and decreasing them during expansions. Therefore, choice B is the correct answer.

Automatic Fiscal Stabilizers Are Most Helpful in