Many government programs, such as unemployment compensation, operate on a deficit during recessions and a surplus during periods of economic expansion. The programs are referred to as
A) discretionary fiscal policy.
B) automatic stabilizers.
C) Ricardian equivalence.
D) Recognition time lag.

Question

Quizplus · Accepted Answer

Government programs that automatically increase spending during recessions and decrease spending during expansion are called automatic stabilizers. Unemployment compensation is an example of an automatic stabilizer that operates on a deficit during recessions, when more people are eligible for benefits, and on a surplus during economic expansion. Discretionary fiscal policy refers to deliberate changes in government spending or taxation to influence the economy, while Ricardian equivalence is a theory that suggests that individuals will adjust their behavior based on their expectations of future government policy, and the recognition time lag refers to the delay between the time when policymakers recognize a problem in the economy and the time when they implement a policy change to address it.

Many Government Programs, Such as Unemployment Compensation, Operate on a Deficit