Because of the automatic stabilizers, a decline in the level of economic activity will cause:
A) a reduction in tax revenues collected.
B) an increase in government expenditures.
C) a greater budget deficit.
D) all of the above.

Question

Quizplus · Accepted Answer

Automatic stabilizers refer to the automatic adjustments in the economy that occur during a downturn without any intervention by policymakers. These stabilizers include the progressive income tax system, unemployment benefits, and welfare programs. As economic activity declines, individuals and businesses pay less in taxes, unemployment and welfare expenditures increase, and the budget deficit grows larger. Therefore, all of the choices given are correct.

Because of the Automatic Stabilizers, a Decline in the Level