The increase in government spending on unemployment insurance payments to workers who lose their jobs during a recession and the decrease in government spending on unemployment insurance payments to workers during an expansion is an example of
A)automatic stabilizers.
B)discretionary fiscal policy.
C)discretionary monetary policy.
D)automatic monetary policy.

Question

Quizplus · Accepted Answer

The given scenario is an example of automatic stabilizers as they automatically adjust the government spending without any deliberate action from policymakers. The increase in unemployment insurance payments during a recession helps to stabilize the economy, while the decrease in payments during an expansion prevents the economy from overheating. Discretionary fiscal policy refers to intentional changes in government spending or taxation, while discretionary monetary policy refers to intentional changes in the money supply by the central bank. Automatic monetary policy is not a recognized term in economics.

The Increase in Government Spending on Unemployment Insurance Payments to Workers