In a recession,automatic stabilizers cause:
A) an increase in tax revenues and a decrease in government spending.
B) a decrease in tax revenues and an increase in government spending.
C) an increase in both tax revenues and government spending.
D) a decrease in both tax revenues and government spending.

Question

Quizplus · Accepted Answer

Automatic stabilizers consist of programs that increase government spending and decrease tax revenues without any deliberate action being taken by the government. During a recession, as unemployment rises, the number of people qualifying for unemployment benefits increases, which increases government spending, while at the same time, a decrease in consumer spending leads to a decrease in tax revenues collected by the government. As a result, automatic stabilizers cause a decrease in tax revenues and an increase in government spending.

In a Recession,automatic Stabilizers Cause