Automatic stabilizers
Part 2
A.
require new legislation to be implemented.
B.
include the progressive income tax but not unemployment compensation.
C.
cause changes in the economy without the action of Congress and the President.
D.
are a component of discretionary fiscal policy.
C. cause changes in the economy without the action of Congress and the President.
The purpose of automatic stabilizers is to
Part 4
A.
lessen the impact of unemployment in a recession and slowdown inflation during an expansion.
B.
act as a safety measure preventing the government from using fiscal policy.
C.
stabilize tax revenue and government expenditures.
D.
make sure people have a living wage.
A. lessen the impact of unemployment in a recession and slowdown inflation during an expansion.
C. cause changes in the economy without the action of Congress and the President.
The correct answer is C. Automatic stabilizers cause changes in the economy without the action of Congress and the President.
To understand why, let's briefly define automatic stabilizers and compare them to discretionary fiscal policy. Automatic stabilizers are specific government programs and policies that are designed to respond automatically to changes in the economy, providing countercyclical support to stabilize economic fluctuations. They are built into the system and do not require any new legislation to be implemented.
On the other hand, discretionary fiscal policy refers to the deliberate actions taken by Congress and the President to change government spending and taxation in order to influence and stabilize the economy. This involves new legislation and active decision-making.
The progressive income tax and unemployment compensation are examples of automatic stabilizers. In an economic downturn, for instance, the progressive income tax automatically reduces the tax burden on individuals and businesses, providing them with more disposable income to spend and stimulate economic activity. Unemployment compensation, on the other hand, automatically increases during periods of high unemployment, providing financial support to individuals who have lost their jobs.
Therefore, option C is correct as automatic stabilizers operate independent of specific action by Congress and the President, making them a valuable tool for stabilizing the economy.