Automatic stabilizers lead to changes in taxation and government spending as eco

Question

Automatic stabilizers lead to changes in taxation and government spending as economic output varies. How do automatic stabilizers impact tax revenue and government spending during a recession? Tax revenue will Select answer and government spending will Select answer -D .ppose that the government is required to balance the budget. Which of the following is an appropriate aiscretionary approach during a recession and what effect would it have to the economy? Cut government spending to equal tax revenue possibly magnifying the effects of a recession. Increase government spending to stimulate the O economy causing an increase in overall aggregate demand. Cut taxes to encourage consumer spending which would minimize the effects of the recession. Invest in public infrastructure that promotes employment and stimulates the economy.

Explanation / Answer

The appropriate approach to balance the budget is:

Cut government spending to equal tax revenue possibly magnifying the effects of a recession.

The effects will be:

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