Which of the following is an example of an automatic fiscal policy action?
A)increased unemployment payments resulting from higher unemployment
B)an increase in spending on defense goods resulting from increased world tensions
C)an increase in the tax rate resulting from a desire to shrink the budget deficit
D)a decrease in the tax rate resulting from an effort to increase aggregate demand to combat a recession
E)None of the above answers is correct.

Question

Quizplus · Accepted Answer

Automatic fiscal policy actions are those that occur automatically without the need for legislative action. Option A is an example of an automatic fiscal policy action, where increased unemployment payments result from higher unemployment levels. Options B, C, and D require deliberate policy action and are therefore not examples of automatic fiscal policy actions. Option E is not the correct answer as Option A fits the criteria for an automatic fiscal policy action.

Which of the Following Is an Example of an Automatic