Which of the following is an example of an automatic stabilizer?

A) Decrease in tax rates by Congress in times of unemployment
B) Decrease in tax rates by Congress in times of inflation
C) Increase in government defense spending during war
D) Increase in unemployment compensation during recession
E) Decrease in welfare programs during inflation

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Humani Nenzhelele · Accepted Answer

Final Answer : D, Explanation :  An increase in unemployment compensation during a recession is an example of an automatic stabilizer. This is because as more people become unemployed during a recession, they become eligible for unemployment benefits, which helps to offset some of the negative effects of the recession on their income and spending. The increase in unemployment compensation happens automatically, without the need for Congress or any other governmental body to take action.

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