An Automatic Stabilizer

question 126

Multiple Choice

An automatic stabilizer

• A)keeps taxes and government spending in a constant ratio to each other throughout the business cycle
• B)increases taxes relative to government spending during contractions and decreases it in expansions
• C)decreases taxes relative to government spending during contractions and increases it in expansions
• D)increases taxes relative to government spending throughout the business cycle
• E)decreases taxes relative to government spending throughout the business cycle

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Definitions:

Social Security Taxes

Taxes collected from employees and employers to fund the Social Security program, which provides benefits for retired workers, disabled individuals, and survivors of deceased workers.

Levied

Imposed or collected, typically used in reference to taxes, duties, or fines by a governing authority.

Policymaking Process

The systematic approach involving identification, assessment, formulation, and implementation of policies aimed at addressing specific issues or achieving desired outcomes.

Federal Reserve System

The central banking system of the United States, responsible for monetary policy, regulating banks, maintaining financial stability, and providing financial services to depository institutions, the U.S. government, and foreign official institutions.