Question

Automatic stabilizers create _____________ during recessions from things like increased government spending on welfare and unemployment insurance, and reduced tax revenues, and create ____________ during peak growth periods of the economy from things like reduced government welfare spending and increased tax revenues.
a. Fiscal stimulus, fiscal contraction.
b. Fiscal stimulus, fiscal stimulus.
c. Fiscal contraction, fiscal stimulus.
d. Fiscal contraction, fiscal contraction.

Answer 1

Answer:

a. Fiscal stimulus, fiscal contraction.

Explanation:

Fiscal stimulus -

It refers to efficiently increases the growth rate of the public debt or increase the government consumption or reducing the taxes , is known as the Fiscal stimulus .

Fiscal Contraction -

It helps to forecast ,  the reducation in the spendings of the government which can atler the future expectations regarding the taxes and government spending will increase the private consumption and will lead to the increament in the overall economy .