If the economy falls into a recession, which of the following responses constitutes the use of automatic fiscal policy?
A) an income tax cut voted on by Congress and quickly signed by the President
B) an existing system to make government payments to the growing ranks of unemployed workers
C) a new program to fund local governments' hiring of 100,000 street sweepers within a year
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

Automatic fiscal policies are mechanisms built into the government budget that automatically increase or decrease net spending (or the budget balance) in response to economic changes without the need for explicit action by policymakers. Option B, an existing system to make government payments to the growing ranks of unemployed workers, is an example of an automatic stabilizer. When unemployment rises, more people automatically receive unemployment benefits, which helps to stabilize the economy by maintaining the purchasing power of the unemployed.

If the Economy Falls into a Recession, Which of the Following