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During economic contractions,transfer payments such as welfare benefits _____.
A) automatically increase,reducing income further.
B) automatically increase,reducing the impact of the contraction on disposable income.
C) automatically decrease because tax revenues fall and welfare benefits are no longer affordable.
D) are decreased as a discretionary move on the part of Congress to stimulate expansion.
E) are increased as a discretionary move on the part of Congress to cushion recipients against the negative effects of economic contraction.
Transfer Payments
Payments made by the government to individuals for which no good or service is provided in return, such as welfare, unemployment benefits, and social security.
Welfare Benefits
Welfare benefits are financial or service-based assistance provided by the government to support individuals and families in need, aiming to ensure a minimum standard of living.
Economic Contractions
Periods where an economy experiences a decline in its general economic activity, often marked by reduced GDP.
- Ascertain and detail the purpose of automatic stabilizers in the economic context.
- Understand the effects of economic contractions and expansions on government policy and vice versa.
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Learning Objectives
- Ascertain and detail the purpose of automatic stabilizers in the economic context.
- Understand the effects of economic contractions and expansions on government policy and vice versa.
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