Which of the following is NOT an automatic stabilizer?

• A. Progressive taxation.
• B. Unemployment benefits.
• C. Discretionary policy changes in response to a recession.
• D. Automatic transfer payments.

Answer: (C)

Automatic stabilizers are built-in features of the fiscal system that automatically respond to changes in income and employment, dampening fluctuations without new legislation. When the economy slows, tax payments tend to fall because income is lower, so disposable income doesn’t drop as sharply and consumer spending is steadier. Unemployment benefits automatically rise as more people lose jobs, providing income to those out of work and supporting demand. Automatic transfer payments increase with need, further stabilizing spending during downturns.

Discretionary policy changes in response to a recession, by contrast, are not automatic. They require lawmakers to plan, approve, and implement new spending or taxation measures, which involves time and political processes and can introduce delays.