Question

categorize the scenarios as either a discretionary act or the result of automatic stabilizers.
a. a recession increases the number of recipients of unemployment benefits.
b. a law is enacted that increases government spending on health - care programs.
c. legislators increase the generosity of unemployment benefits.
d. economic growth increases personal and corporate income, increasing tax payments.

Explanation:

• Part a: Automatic stabilizers are built - in economic mechanisms that respond to economic conditions without government intervention. During a recession, more people become unemployed, so the number of unemployment benefit recipients increases automatically due to the existing unemployment benefit system. It doesn't require a new policy decision.
• Part b: A discretionary act is a deliberate policy choice made by the government. Enacting a law to increase government spending on health - care programs is a conscious decision by the legislators, not an automatic response to economic conditions.
• Part c: Increasing the generosity of unemployment benefits is a discretionary act because it is a policy change decided by the legislators. It is not an automatic response to economic changes but a deliberate choice.
• Part d: Automatic stabilizers work here. When economic growth occurs, personal and corporate incomes rise. Since tax payments are based on income (e.g., income taxes), tax payments increase automatically without any new policy being implemented. It is part of the built - in tax system that responds to changes in economic activity.

Answer:

a. Result of automatic stabilizers
b. Discretionary act
c. Discretionary act
d. Result of automatic stabilizers