Automatic stabilizers cause a smaller budget deficit (larger budget surplus) during recessionary periods and a larger deficit (smaller surplus) during expansionary periods.

Question

Quizplus · Accepted Answer

Automatic stabilizers tend to increase the budget deficit (or reduce the surplus) during recessionary periods by increasing government spending or decreasing tax revenues automatically, and decrease the deficit (or increase the surplus) during expansionary periods by decreasing government spending or increasing tax revenues.

Automatic Stabilizers Cause a Smaller Budget Deficit (Larger Budget Surplus)