Which of the following statements is correct?
A)Built-in stability only partially offsets fluctuations in economic activity.
B)Built-in stability works in halting inflation, but it cannot alleviate unemployment.
C)Built-in stability can be relied on to eliminate completely any fluctuation in economic activity.
D)Built-in stability overcorrects for fluctuations in economic activity; for example, it may change a small expansion into a recession.

Question

Quizplus · Accepted Answer

Built-in stability measures such as automatic stabilizers (e.g. progressive income tax, unemployment benefits) can only partially offset fluctuations in economic activity. They can help reduce the severity of economic cycles, but not eliminate them completely.

Which of the Following Statements Is Correct