Asked by Jocelyn Cooperwood on May 11, 2024
Verified
Which of the following is an example of an automatic stabilizer?
A) The reduction in the money supply that occurs as banks become less willing to make loans during a recession
B) The reduction in real wages that occurs as the economy goes into a recession
C) The increase in government spending that occurs as the result of new spending bills passed by Congress
D) The rise in tax revenue that occurs as a result of growth in real GDP
E) All of the choices are examples of an automatic stabilizer.
Automatic Stabilizer
Economic policies and programs designed to offset fluctuations in a nation's economic activity without additional intervention by the government or policymakers.
Tax Revenue
The income that the government receives from taxpayers, including both individuals and businesses, used to fund public services and infrastructure.
- Identify the influence of automatic stabilizers on economic conditions.
Verified Answer
LP
Linah PriscillaMay 17, 2024
Final Answer :
D
Explanation :
An automatic stabilizer is a government policy or program that is designed to mitigate the effects of economic fluctuations without any additional government action. The rise in tax revenue that occurs as a result of growth in real GDP is an example of an automatic stabilizer because it helps to stabilize the economy by decreasing the deficit during times of economic growth and by increasing government revenue during times of economic expansion.
Learning Objectives
- Identify the influence of automatic stabilizers on economic conditions.