The presence of ________ means that the federal deficit is larger than it otherwise would be in a recession, and smaller than it otherwise would be in an expansion.

Question

Quizplus · Accepted Answer

Automatic stabilizers are government policies or programs that automatically adjust spending or taxes in response to changes in the economy. These stabilize the economy by offsetting changes in private spending to reduce the impact of fluctuations in economic activity. During a recession, automatic stabilizers increase government spending (e.g. unemployment benefits) and decrease taxes (e.g. income tax). During an expansion, they decrease government spending and increase taxes. As a result, the federal deficit is larger than it otherwise would be in a recession and smaller than it otherwise would be in an expansion.

The Presence of ________ Means That the Federal Deficit Is