Which of the following is an automatic stabilizer ?
Correct answer: E. Unemployment benefits
- A. Spending on public schools
- B. Military spending
- C. All of these answers are automatic stabilizers
- D. spending on the space shuttle
- E. Unemployment benefits
Explanation
Unemployment benefits automatically increase when unemployment rises and decrease when employment recovers, helping stabilise incomes without a new policy decision. Public schools, military spending, and space-shuttle spending generally require deliberate budget decisions.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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