Because automatic stabilizers increase government spending and decrease tax revenue during a recession and have the opposite effect during a recovery, they tend to create budget:
A)deficits throughout the business cycle.
B)surpluses throughout the business cycle.
C)deficits during the recovery phase of the business cycle and budget surpluses during the recession phase.
D)deficits during the recession phase of the business cycle and budget surpluses during the recovery phase.

Question

Quizplus · Accepted Answer

Automatic stabilizers lead to increased government spending and reduced tax revenue during recessions, resulting in budget deficits. Conversely, during recoveries, they decrease spending and increase tax revenue, potentially leading to surpluses.

Because Automatic Stabilizers Increase Government Spending and Decrease Tax Revenue