When automatic stabilizers are the cause of higher deficits,we would expect to observe that
A)the economy has been contracting
B)the economy has been growing
C)interest rates must be rising
D)interest rates must be falling
E)net exports have been decreasing

Question

Quizplus · Accepted Answer

Automatic stabilizers, such as unemployment benefits and progressive income taxes, are designed to kick in during times of economic contraction to help stimulate the economy. Therefore, if automatic stabilizers are the cause of higher deficits, it is likely that the economy has been contracting.

When Automatic Stabilizers Are the Cause of Higher Deficits,we Would