Which of the following is an example of an automatic stabilizer? A. an increase in government...

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

A. an increase in government military spending
B. government stimulus checks due to the Corona virus
C. an increase in consumption spending
D. sales taxes
E. progressive income taxes

Solutions

Expert Solution

Option B

government stimulus checks due to the Corona virus.

Automatic stabilizers are ongoing fiscal policies that a government implements in order to help cushion an economy from fluctuations and recessions. This is mainly done through taxes and government spending. Automatic stabilizers are used to offset fluctuations in a country's economic output. These help stimulate the economy when it is in a recession and prevent it from growing too rapidly when the economy is booming. During a recession, automatic stabilizers are used to decrease taxes and increasing government spending.

A stimulus check is a check sent to a taxpayer by the U.S. government. Stimulus checks are intended to stimulate the economy by providing consumers with some spending money. When taxpayers spend this money, it will boost consumption and drive revenues at retailers and manufacturers and, thus, spur the economy.At present US economy is on the verge of recession.Due to lockdowns the economic activity is stopped. Stimulus check will boost the economy by stimulating demand, consumption and keep the economy growing.

Rahul Sunny answered 2 weeks ago

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