When an economy expands into an economic boom, automatic stabilizers will tend to
A) enlarge the budget deficit (or reduce the surplus).
B) reduce the budget deficit (or increase the surplus).
C) ensure that the budget will remain in balance.
D) reduce the supply of money and, thereby, retard aggregate demand.

Question

Quizplus · Accepted Answer

Automatic stabilizers, such as progressive taxes and welfare programs, naturally adjust to economic conditions. During a boom, tax revenues increase and welfare spending decreases, reducing the budget deficit or increasing the surplus.

When an Economy Expands into an Economic Boom, Automatic Stabilizers