Question

Automatic stabilizers smooth fluctuations in the economy because they produce changes in the government's budget that: A. Reinforce changes in GDP B. Help offset changes in GDP C. Produce a cyclically-adjusted budget D. Produce a standardized budget

Answer 1

Answer:

The correct answer is B. Help offset changes in GDP.

Explanation:

In addition to the discretionary fiscal policies, through which the authorities actively decide to adjust spending or income in response to changes in the economic cycle, the variations that occur in these items must be taken into account without the need for governments Make new decisions. In the latter case, the changes respond to the role of automatic stabilizers.

Automatic stabilizers are those items of public budgets that are automatically altered, hence their denomination, as a result of changes in the level of economic activity. On the income side, it is worth pointing out the main stabilizers are the taxes that tax corporate profits, the income of workers or the consumption of goods and services; On the expense side, unemployment benefits, which support the income of families in times of increased unemployment, are one of the most relevant stabilizers.