Question

Automatic stabilizers are government programs that:

a. shift the budget toward a deficit when the economy slows but shift it toward a surplus during an expansion.
b. bring expenditures and revenues automatically into balance without legislative action.
c. increase tax collections automatically during a recession.
d. exaggerate the ups and downs in aggregate demand without legislative action.

Answer 1

Automatic stabilizers are government programs that exaggerate the ups and downs in aggregate demand without legislative action. By reducing the ups and downs to help the demand and supply of products, the government tries to create balance within the economy. Automatic stabilizers work so that the government doesn't have to intervene each time something is needed to help the demand.