Final answer:
Welfare payments are the best example of an automatic stabilizer as they automatically adjust with the level of economic activity, providing immediate economic relief during downturns and helping to cool the economy during expansions.
Step-by-step explanation:
Among the options provided, welfare payments serve as the best example of an automatic stabilizer. Automatic stabilizers help to offset fluctuations in a country's economic activity without the need for explicit government intervention through policy changes every time the economy goes into a recession or expansion. Welfare payments increase when unemployment rises, thus quickly pumping money into the hands of individuals who are likely to spend it, stimulating demand and providing a buffer against downturns. Conversely, in times of economic growth, welfare payments decrease as more people become employed, automatically slowing down potential overheating in the economy.
Unlike welfare payments, foreign aid, defense spending, and highway construction require deliberate legislative or administrative actions to change, therefore they are not considered automatic stabilizers. These types of government expenditures do not automatically adjust with the level of economic activity.