Automatic stabilizers stabilize the level of real GDP because:
A) Congress quickly changes spending and tax revenue.
B) federal expenditures and tax revenues change as the level of real GDP changes.
C) the spending and tax multiplier are constant.
D) wages are controlled by the minimum wage law.

Question

Quizplus · Accepted Answer

Automatic stabilizers, such as unemployment benefits and progressive income taxes, are designed to automatically increase government spending and decrease taxes during an economic downturn, and decrease government spending and increase taxes during an economic boom. This helps to stabilize the level of real GDP without the need for Congress to quickly change spending and tax revenue.

Automatic Stabilizers Stabilize the Level of Real GDP Because