An example of an automatic stabilizer is
A) unemployment compensation.
B) a newly enacted surtax to slow down an overheated economy.
C) a constant money supply rule.
D) a deliberate increase in government spending to fight recession.

Question

Quizplus · Accepted Answer

Unemployment compensation is an automatic stabilizer because it automatically increases during times of economic downturn when more people lose their jobs, which provides a financial safety net and stimulates consumer spending. Similarly, it automatically decreases during times of economic growth when fewer people are unemployed. The other options are either discretionary fiscal policies, such as a surtax or an increase in government spending, or a monetary policy rule, such as a constant money supply, which are not automatic stabilizers.

An Example of an Automatic Stabilizer Is