The built-in stabilizers in the economy tend to:

Question

Quizplus · Accepted Answer

The built-in stabilizers in the economy, such as progressive income taxes, unemployment benefits, and welfare payments, automatically increase government spending or decrease taxes during a recession and decrease government spending or increase taxes during an expansion. This dampens the irregular swings in real GDP to some extent. However, they do not fully compensate for the fluctuations in real GDP, and therefore option A and D can be ruled out. Option B is also incorrect as the stabilizers do not magnify the irregular swings in real GDP.

The Built-In Stabilizers in the Economy Tend To