Automatic stabilizers make fiscal policy easier to undertake because they
A) allow economists to formulate rules so that the economy is perpetually stable.
B) enable policy makers to prescribe public works programs during inflationary periods since expenditures for unemployment and welfare have correspondingly decreased.
C) act to increase spending when the economy turns down and to decrease spending when the economy overheats.
D) eliminate the causes of unemployment and inflation experienced by the economy.
E) give the president the complete authority for determining stabilization policy.

Question

Quizplus · Accepted Answer

Automatic stabilizers adjust government spending and tax revenue automatically in response to changes in economic conditions. During economic downturns, they increase government spending (unemployment benefits, welfare payments) and decrease taxes, which helps to boost aggregate demand and stimulate the economy. During expansionary periods, they decrease government spending and increase taxes, which helps to cool down the economy and prevent inflation. This automatic adjustment makes fiscal policy easier to implement and less reliant on discretionary policy decisions.

Automatic Stabilizers Make Fiscal Policy Easier to Undertake Because They