ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Stimulus checks that congress had to vote on
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A paycheck from your employer
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Unemployment Insurance
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Interest on your savings account
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Detailed explanation-1: -A common example of automatic stabilizers is corporate and personal income taxes that are progressively graduated, which means that they are fixed in proportion to the income levels of the taxpayer. Other examples include transfer systems, such as unemployment insurance, welfare, stimulus checks, etc.
Detailed explanation-2: -The most prominent automatic stabilizers are taxes, unemployment insurance (UI), the Supplemental Nutrition Assistance Program (SNAP), and Medicaid.
Detailed explanation-3: -An example of an automatic stabilizer is unemployment benefits. During recessions the economy experiences insufficient aggregate demand, the unemployment benefits help to increase aggregate demand.
Detailed explanation-4: -Most taxes have a stabilizing effect because they automatically move with economic growth. For example, personal and corporate income tax collections decline during recessions along with income and profits, and payroll tax collections decline when employment and wages fall.
Detailed explanation-5: -The action by the government to raise income taxes aimed at reducing excess is not an automatic stabilizer. It is a discretionary fiscal policy.