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Which of the following automatic stabilizers will NOT increase during a recession?Multiple choice question.Welfare paymentsEmployment insuranceTaxesSocial assistance

Question

Which of the following automatic stabilizers will NOT increase during a recession?Multiple choice question.Welfare paymentsEmployment insuranceTaxesSocial assistance

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Solution

The automatic stabilizer that will NOT increase during a recession is Taxes. During a recession, income levels generally decrease, which leads to a decrease in collected taxes. On the other hand, welfare payments, employment insurance, and social assistance are all forms of government aid that typically increase during a recession to help support those who are unemployed or underemployed.

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