During recessions, how do automatic stabilizers change government deficit and taxes?
A) Both deficit and taxes increase.
B) Both deficit and taxes decrease.
C) Deficit increases and taxes decrease.
D) Deficit decreases and taxes increase.

Question

Quizplus · Accepted Answer

Automatic stabilizers work by increasing government spending and decreasing taxes during recessions, which increases the deficit as government expenditures rise to support the economy and tax revenues fall due to lower tax rates and decreased economic activity.

During Recessions, How Do Automatic Stabilizers Change Government Deficit and Taxes