An 'automatic stabiliser' is:
A)a policy for growth of an economy where the current account of the balance of payments is kept in balance.
B)a monetary or fiscal policy that aims to smooth out the business cycle.
C)the tendency for inflation to fall as unemployment rises.
D)a tax or form of government expenditure that has the effect of reducing the size of business cycle fluctuations.

Question

Quizplus · Accepted Answer

Automatic stabilizers are mechanisms built into government budgets, without specific action by policymakers, that tend to reduce the severity of economic fluctuations. This includes progressive taxes and welfare programs that automatically increase spending or decrease taxes as an economy slows down, thus dampening the business cycle.

An 'Automatic Stabiliser' Is