Which of the following is an example of an automatic stabilizer?
A)tax reductions passed by Congress in times of unemployment
B)tax reductions passed by Congress in times of inflation
C)government defense spending
D)unemployment compensation
E)welfare programs

Question

Quizplus · Accepted Answer

Unemployment compensation is an example of an automatic stabilizer because it provides assistance to individuals who have lost their jobs and helps to maintain aggregate demand during economic downturns. As more people become unemployed, demand for goods and services decreases, which can lead to further reductions in employment. Unemployment compensation helps to offset this negative cycle by providing financial support to those who have lost their jobs, which in turn helps to support consumer spending and maintain aggregate demand.

Which of the Following Is an Example of an Automatic