Which of the following best describes what is meant by automatic stabilization policies?

A) Policies that automatically help boost the economy when heading into an economic upturn
B) Policies that require the direct action of the movement of the economy
C) Policies that tend to dampen increases in aggregate demand during expansion and stimulate aggregate demand during recession without the requirement of political voting
D) Any policy that acts on fiscal matters to improve economic performance

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Sherryl arandia · Accepted Answer

Final Answer : C, Explanation :  Automatic stabilization policies are designed to stabilize economic fluctuations without the need for explicit intervention by government officials. These policies automatically adjust government spending and taxation levels in response to changes in the economy, in order to offset the effects of expansions and contractions. In other words, they tend to dampen increases in aggregate demand during expansion and stimulate aggregate demand during recession without the requirement of political voting.

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