What is the most important automatic stabilizer?
A) government spending
B) the tax system
C) unemployment compensation
D) welfare benefits

Question

Quizplus · Accepted Answer

The tax system is considered the most important automatic stabilizer because it automatically adjusts the flow of funds into and out of the government's budget based on the economic cycle. During periods of economic expansion, tax revenues increase as incomes rise, helping to temper inflation. During recessions, tax revenues fall, providing an automatic fiscal stimulus to the economy by leaving more money in the hands of consumers and businesses.

What Is the Most Important Automatic Stabilizer