Automatic Stabilizers Decrease the Impact of a Recession on the Level

Multiple Choice

Automatic stabilizers decrease the impact of a recession on the level of economic activity because they

A) reduce the interest rate and so allow firms to increase their level of investment.
B) increase taxes so the budget is always balanced.
C) raise the exchange rate so U.S.exports become more attractive to foreigners.
D) mean disposable income does not change by as much as real GDP.
E) increase the quantity of money in circulation.