Automatic stabilizers dampen economic fluctuations during recessions because ________ decrease while ________ increase.

Question

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Automatic stabilizers refer to programs that automatically adjust government transfers and tax collections in response to economic conditions. Transfer payments increase during recessions, as more people become eligible for unemployment benefits and other forms of assistance. In contrast, tax payments decrease during recessions as individuals and businesses earn less income and pay fewer taxes. This combination helps to cushion the economic impact of recessions and stabilize the economy.

Automatic Stabilizers Dampen Economic Fluctuations During Recessions Because ________ Decrease