The effect of automatic stabilizers on the business cycle is to:

A) make upswings larger and downswings smaller.
B) make upswings smaller and downswings larger.
C) make both upswings and downswings smaller.
D) eliminate fiscal drag.
E) make both upswings and downswings larger.

Automatic Stabilizers

Economic policies and programs that automatically adjust to counteract economic fluctuations without the need for government intervention.

Business Cycle

The fluctuations in economic activity that an economy experiences over a period of time, marked by periods of expansion and contraction in GDP.

Fiscal Drag

The negative effect on disposable income and aggregate demand when taxes do not fall in line with inflation, effectively increasing the tax burden.