Government transfer payments act as automatic stabilizers because as labor income decreases, transfer payments
A)decrease as well.
B)remain constant.
C)increase.
D)to the government increase.

Question

Quizplus · Accepted Answer

Transfer payments increase as labor income decreases, which helps to stabilize consumer spending and aggregate demand in the economy. This is because individuals who receive transfer payments are more likely to spend the money immediately, which can boost economic activity during times of recession or economic downturns.

Government Transfer Payments Act as Automatic Stabilizers Because as Labor