An automatic stabilizer:

A) increases inflationary pressure during expansions.
B) Increases the drop in disposable income during recessions and increases the jump in disposable income during expansions.
C) reduces the drop in disposable income during recessions and reduces the jump in disposable income during expansions.
D) increases tax revenue relative to government spending throughout the business cycle.
E) decreases tax revenue relative to government spending throughout the business cycle.

Automatic Stabilizer

Economic policies and programs, such as unemployment insurance and progressive taxes, that automatically help stabilize an economy by reducing the severity of economic fluctuations without additional government intervention.

Disposable Income

The residual financial power of households for savings and consumption post the subtraction of income taxes.

Inflationary Pressure

Situations where upward trends in prices are predicted due to factors such as increased production costs or rising demand.