If the deficit is increasing because of the effects of automatic stabilizers,_____.
A)the budget is annual balanced
B)the economy is contracting
C)the annual deficit will approach zero
D)the budget is cyclically balanced
E)the economy is growing

Question

Quizplus · Accepted Answer

Automatic stabilizers are a component of fiscal policy that automatically adjust government expenditures and tax revenues in response to fluctuations in economic activity. During periods of economic contraction, automatic stabilizers increase government expenditures and decrease tax revenues, which can result in an increasing budget deficit. Therefore, an increasing deficit due to the effects of automatic stabilizers suggests that the economy is contracting.

If the Deficit Is Increasing Because of the Effects of Automatic