Question

which of the following is not an example of an automatic stabilizer? a. the increase in unemployment insurance payments during a recession b. the increase in welfare payments during a recession c. the reduction in income tax revenues during a recession d. the passage of a stimulus package to respond to a recession e. all of these are automatic stabilizers.

Answer 1

The option that is not an example of an automatic stabilizer is a. the increase in unemployment insurance payments during a recession

What is meant by automatic stabilizer?

Automatic stabilizers  can be described as the mechanisms that is been built into government budgets, without any vote from legislators, that increase spending or decrease taxes when the economy slows.

It should be noted that the economic stabilizer, which can be practiced by institutions and practices in an economy and it  serve to reduce fluctuations in the business cycle through offsetting effects on the amounts of income available .

In conclusion, the  automatic stabilizers  can be perceived as the features of the structure of modern government budgets which can be felt in the area of the income taxes and welfare spending.

Therefiore, option A is correct.

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