Anything that increases the government's budget deficit (or reduces its budget surplus) during a recession and increases its budget surplus (or reduces its budget deficit) during an expansion without requiring explicit action by policymakers is called what?

Question

Multiple choice question.

Corporate taxes

Discretionary policy

Government spending

A built-in stabilizer

Answer 1

The correct answer is A built-in stabilizer.

Built-in stabilizers are automatic fiscal mechanisms that help stabilize the economy without the need for explicit policy changes. They increase the budget deficit or reduce the surplus during a recession and decrease the deficit or increase the surplus during an expansion.