Question

Automatic stabilizers offset approximately how much of the initial movement in the level of output during a recession:

A. All of it
B. None of it
C. A significant portion of it
D. Only a negligible amount of it

Answer 1

Automatic stabilizers offset approximately 10% of the initial movement in the level of output during a recession.

Step-by-step explanation:

Automatic stabilizers offset approximately 10% of the initial movement in the level of output during a recession. While they do not offset all or most of the shift in aggregate demand, they still play a significant role in reducing the impact of economic downturns. Similar to shock absorbers in a car, automatic stabilizers help cushion the worst bumps of a recession, even if they do not completely eliminate them.