Question

Automatic stabilizers are changes in taxes or government spending that increase aggregate demand without requiring policy makers to act when the economy goes into recession. Group of answer choices A.True B. False

Answer 1

Answer: True

Explanation: In simple words, automatic stabilizers refers to the government policies, that runs on a continuing basis, that automatically changes tax rates and interest factors etc in case of economic changes like recession or inflation.

These stabilizers works automatically due to market forces as per the changing economic scenario and do not need additional efforts from government to come into play.

Automatic stabilizers are favored by Keynesian economics to be used as a tool to tackle economic recessions and slumps.