Because of automatic stabilizers,_____.
A)fiscal policy focuses on maintaining an annually balanced budget
B)planning discretionary fiscal measures to reduce economic fluctuations is easy
C)government budget deficits are zero if averaged out over the entire business cycle
D)policy makers should be concerned less with balancing the budget annually
E)government budget deficits are smaller during expansions and larger during contractions

Question

Quizplus · Accepted Answer

Automatic stabilizers are government spending and taxation programs that automatically decrease government spending and increase taxes during times of economic expansion, and increase government spending and decrease taxes during times of economic contraction. As a result, government budget deficits are smaller during expansions when tax revenues increase and spending on programs like unemployment benefits decrease, and larger during contractions when tax revenues decrease and spending on programs like unemployment benefits increase. Therefore, policy makers should be concerned less with balancing the budget annually due to the automatic stabilizers.

Because of Automatic Stabilizers,_____