ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A government stimulus package
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An increase in the personal income tax rates
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Unemployment compensation for those who have lost their jobs
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Open Market Operations
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Detailed explanation-1: -The best-known automatic stabilizers are progressively graduated corporate and personal income taxes, and transfer systems such as unemployment insurance and welfare. Automatic stabilizers are called this because they act to stabilize economic cycles and are automatically triggered without additional government action.
Detailed explanation-2: -Which of the following is an example of an automatic stabilizer that can reduce the effect of a recession on output? Tax revenues are an example of an automatic stabilizer.
Detailed explanation-3: -Automatic stabilizers are automatic changes which stabilize the business cycle without need for approval. Unemployment benefits are an example of this because as the economy worsens, the government automatically increases unemployment spending.
Detailed explanation-4: -Answer and Explanation: Financial assistance for disabled people may not be considered as an automatic stabilizer.