Chapter 21, Problem 5MCQ

To determine

The correct option which is not an automatic stabilizer

Answer to Problem 5MCQ

From the available options, the correct option is monetary policy.

Explanation of Solution

An automatic stabilizer is the policy which can be adjusted whenever required to change it such as the government can increase or decrease income tax rates, unemployment insurance, medical services, and food services according to the growth of the economy. But monetary policy is not an automatic stabilizer as it controls the quantity of money by suppling new money and it does not adjust automatically when needed.

Therefore, options: a, b, c, and option d are incorrect.

Here, the correct option is e (monetary policy).

Economics Concept Introduction

Introduction: An automatic stabilizer refers to the mechanism or ongoing policy of the government that adjust tax rates and transfer of payments when needed such as increase spending when economy is slow.