Question

Automatic stabilizers:

A) counteract the business cycle.
B) reinforce the business cycle.
C) do not affect the business cycle.
D) are also called "discretionary fiscal policy.

Answer 1

Automatic stabilizers are taxing and spending mechanisms that respond to economic events and help stabilize the economy. They offset part of the shifts in aggregate demand but not all of it. They have historically offset about 10% of any initial movement in the level of output.

Step-by-step explanation:

Automatic stabilizers are taxing and spending mechanisms that shift in response to economic events without any further legislation. They occur quickly, helping to slow down the rate of decrease in aggregate demand during economic slowdowns and restraining aggregate demand during economic booms. While they offset part of the shifts in aggregate demand, they do not offset all of it. Historically, automatic stabilizers have offset about 10% of any initial movement in the level of output.