Question

In an​ expansion, taxes rise and government expenditures​ fall, and therefore act as automatic​ ________. Inflation is more likely to increase in an expansion than in a​ recession, and therefore acts as an automatic​ ________.

Answer 1

The correct answer is: stabilizers; destabilizer.

Step-by-step explanation:

The automatic stabilizer is a government policy that correct fluctuations in the economy through their normal operation and hence they are called automatic stabilizers.

Taxes and government spending are examples of automatic stabilizers.

During an expansion, taxes increase with an increase in income and government spending decrease. These two without any intervention by the government automatically stabilize the economy.

Automatic destabilizer causes fluctuations by their normal operation. An example of destabilizer is inflation which increases during expansion and causes fluctuations without any intervention.