Author Question: What are automatic stabilizers? How do they affect the budget deficit and/or budget surplus during a ... (Read 42 times)

Coya19@aol.com · **on:** Jun 29, 2018

What are automatic stabilizers? How do they affect the budget deficit and/or budget surplus during a recession and during an expansion?

What will be an ideal response?

Question 2

The above figure shows the U.S. market for chocolate. With international trade, consumer surplus is equal to

A) area A + area B + area C + area D.
B) area A.
C) area B + area C + area D.
D) area C + area D.
E) area E.

mmj22343 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Automatic stabilizers are features of fiscal policy that stabilize real GDP without the need for explicit policy action by the government. Automatic stabilizers include induced taxes and needs-tested spending. During a recession, induced taxes decrease and needs-tested spending increases, so the budget deficit increases (or the budget surplus decreases). During an expansion, induced taxes increase and means-tested spending decreases, so the budget deficit decreases (or the budget surplus increases).

Answer to Question 2

A