The less government expenditure falls as national income rises, the smaller will be the stabilising effect of the automatic stabiliser.

Question

Quizplus · Accepted Answer

Automatic stabilizers work by reducing the impact of economic fluctuations, and if government expenditure decreases less as national income rises, it means these stabilizers are less active in smoothing out the economic cycle, leading to a smaller stabilizing effect.

The Less Government Expenditure Falls as National Income Rises, the Smaller