The presence of the automatic stabilizers means an increase in the budget deficit will be automatically experienced during an economic expansion whereas a budget surplus will be automatically experienced during a recession.

Question

Quizplus · Accepted Answer

The presence of automatic stabilizers means that government spending will naturally increase during a recession and decrease during an expansion, helping to stabilize the economy. However, this does not necessarily mean that there will be a budget surplus during a recession or a deficit during an expansion. It is possible for the government to intentionally run a deficit during a recession to provide necessary stimulus, or to run a surplus during an expansion to pay down debt.

The Presence of the Automatic Stabilizers Means an Increase in the Budget