Question

An automatic stabilizer: A. extracts money from the economy during recessions. B. is exemplified by a program such as unemployment compensation. C. injects money into the economy during booms. D. is exemplified by a program such as the Corps of Engineers dam-building program.

Answer 1

Answer:

B) Exemplified by a program such as unemployment compensation.

Explanation:

Automatic stabilizer is an example of fiscal policy that result automatically and tend to offset fluctuations in economic activity without direct intervention from the policymakers.

They are used to stabilize the economy.

Automatic stabilizer could be referred to as economy stabilizer

Examples are;

Tax reduction and spending more of government during recession

Increase of tax during booms

Extract money from the economy during booms

Unemployment compensation, unemployment insurance and welfare.

Automatic stabilizers are features of the tax and transfer systems that temper the economy when it overheats and stimulate the economy when it slumps, without direct intervention by policy makers.