If automatic stabilizers are creating budget deficits, the economy must be experiencing a decrease in output.

Question

Quizplus · Accepted Answer

Automatic stabilizers such as unemployment insurance and progressive taxation are designed to activate during times of recession or economic slowdown in order to increase government spending and support individuals and businesses. This can result in budget deficits, but it is a necessary measure to help stabilize and stimulate the economy during periods of decreased output.

If Automatic Stabilizers Are Creating Budget Deficits, the Economy Must