If the deficit is increasing because of the effects of the automatic stabilizers,
A)all of the following
B)the economy is contracting
C)the annual deficit will approach zero
D)the budget is cyclically balanced
E)the economy is growing

Question

Quizplus · Accepted Answer

The automatic stabilizers, such as unemployment insurance and progressive taxation, are designed to kick in during economic downturns and provide a cushion for individuals and businesses. As a result, if the deficit is increasing due to the effects of automatic stabilizers, it suggests that the economy is contracting and there is a need for these stabilizers to support the economy. This also means that the annual deficit is unlikely to approach zero and the budget is not cyclically balanced, as the deficit is a result of the stabilizers rather than discretionary spending or policy choices.

If the Deficit Is Increasing Because of the Effects of the Automatic