Automatic fiscal policy

Question

Quizplus · Accepted Answer

Automatic fiscal policy is triggered by the state of the economy. When there is a downturn in the economy, automatic stabilizers like unemployment insurance, progressive income taxes, and welfare payments kick in, leading to an increase in government spending or decrease in taxation, without any action by the Parliament. Hence, option B is the correct choice. Options A, C, D, and E are incorrect as automatic fiscal policy requires no action by the Parliament, involves changes in both government spending and taxation, and occurs during both recessions and expansions.

Automatic Fiscal Policy