AP Macroeconomics Practice Quiz: Automatic Stabilizers
Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026
Test your understanding with short quizzes. This quiz has 11 questions to check your progress.
Question 1 of 11
All Questions (11)
A) To eliminate business cycles entirely.
B) To moderate business cycles.
C) To increase government revenue during recessions.
D) To create new social service programs.
Correct Answer: B
The text explicitly states that automatic stabilizers 'moderate business cycles' and 'support the economy during recessions and help prevent the economy from being overheated during expansionary periods.' They do not eliminate the cycles but rather lessen their severity.
A) Tax revenues increase automatically to fund government spending.
B) Tax revenues are manually lowered by new government policies.
C) Tax revenues decrease automatically as GDP falls.
D) Tax revenues remain constant to ensure a balanced budget.
Correct Answer: C
The content states, 'Tax revenues decrease automatically as GDP falls, preventing consumption and the economy from falling further.' This is a key mechanism of automatic stabilizers during a downturn.
A) To accelerate economic growth by lowering taxes.
B) To slow consumption and prevent the economy from overheating.
C) To decrease the national debt by cutting social service programs.
D) To encourage more investment by keeping tax revenues stable.
Correct Answer: B
According to the text, 'Tax revenues increase automatically as GDP rises, slowing consumption and preventing the economy from overheating.' This helps to cool down an overly rapid expansion.
A) A decision by the central bank to change interest rates.
B) A new infrastructure spending bill passed by the legislature.
C) Transfer payments from social service programs.
D) The sale of government bonds to the public.
Correct Answer: C
The text identifies two main types of automatic stabilizers: the tax system (where revenues change with GDP) and 'social service programs whose transfer payments act as automatic stabilizers.'
A) expansions; recessions
B) recessions; expansions
C) periods of high inflation; periods of deflation
D) trade surpluses; trade deficits
Correct Answer: B
The text directly states, 'Automatic stabilizers support the economy during recessions and help prevent the economy from being overheated during expansionary periods.'
A) It forces the government to reduce spending, which balances the budget.
B) It increases the profitability of corporations, leading to immediate hiring.
C) It prevents a more severe drop in consumption by leaving more money for households to spend.
D) It signals to international markets that the economy is recovering.
Correct Answer: C
The text explains that as GDP falls, 'Tax revenues decrease automatically... preventing consumption and the economy from falling further.' This implies that with a lower tax burden, households and businesses have more disposable income than they otherwise would, which supports consumption.
A) They decrease, stimulating further growth.
B) They increase, helping to slow down the economy.
C) They are cut by the government to reward productivity.
D) They remain unchanged to promote stability.
Correct Answer: B
The content specifies that 'Tax revenues increase automatically as GDP rises, slowing consumption and preventing the economy from overheating.' This acts as a natural brake on the economy.
A) a progressive tax system.
B) new, explicit action by government policymakers.
C) the existence of a business cycle.
D) any government social service programs.
Correct Answer: B
The term 'automatic' implies that these mechanisms function without new legislation or deliberate intervention. They are built into the existing structure of government policies, such as the tax code and social service programs.
A) They decrease as the government's tax revenue falls.
B) They increase, providing income to those affected by the downturn, which supports consumption.
C) They are converted into government loans to stimulate business investment.
D) They remain fixed, providing a predictable but unchanging level of support.
Correct Answer: B
Although the text doesn't detail the mechanism, it states that transfer payments act as stabilizers. During a recession (falling GDP), more people typically qualify for programs like unemployment benefits. These payments provide income to households, which helps to prevent consumption from falling as much as it otherwise would.
A) Decreasing tax revenues and increasing transfer payments.
B) Increasing tax revenues that slow consumption.
C) Decreasing government spending on social services.
D) Maintaining a constant level of tax revenue.
Correct Answer: B
The text directly links the prevention of overheating to rising tax revenues. It states, 'Tax revenues increase automatically as GDP rises, slowing consumption and preventing the economy from overheating.'
A) They make economic expansions stronger and recessions deeper.
B) They create business cycles through tax policy.
C) They reduce the amplitude of economic fluctuations.
D) They only function during recessions, not expansions.
Correct Answer: C
By supporting the economy in a recession (making the trough less deep) and slowing it during an expansion (making the peak less high), automatic stabilizers 'moderate' the business cycle. This is equivalent to reducing the amplitude (the severity of the peaks and troughs) of economic fluctuations.