Which of the following would be an example of an automatic stabilizer?
Which of the following would be an example of an automatic stabilizer?
The increase in unemployment benefits during a recessionary gap
The Fed buying bonds during a recessionary gap
The increase in social security benefits as the population ages
The government increases expenditures during times of war
The government increasing taxes during an inflationary gap
Homework Answers
Ans- The government increasing unemployment benefits during a recessionary gap.
Explanation- Automatic stabilizer are features of the tax and transfer system that temper by economy when it overheats and stimulate the economy when it slums, without direct intervention by policy makers.The best-known automatic stabilizers are progressively graduated corporate and personal income taxes, and transfer systems such as unemployment insurance and welfare.
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