Which of the following is NOT considered an automatic stabilizer in macroeconomics?

• A. Government spending on infrastructure
• B. Unemployment insurance
• C. Progressive income taxes
• D. Welfare payments

Answer: (A)

Verified step by step guidance

1. Step 1: Understand what an automatic stabilizer is in macroeconomics. Automatic stabilizers are government policies or programs that automatically adjust to economic conditions without additional legislative action, helping to moderate fluctuations in the business cycle.
2. Step 2: Identify the characteristics of each option. Automatic stabilizers typically include programs that increase government spending or reduce taxes when the economy slows down, and decrease spending or increase taxes when the economy grows.
3. Step 3: Analyze 'Unemployment insurance' — it provides payments to unemployed workers automatically when unemployment rises, thus acting as an automatic stabilizer.
4. Step 4: Analyze 'Progressive income taxes' — as incomes fall during a recession, people pay less tax, which cushions the economic downturn, making it an automatic stabilizer.
5. Step 5: Analyze 'Welfare payments' — these increase automatically when more people qualify during economic downturns, providing support without new legislation, so they are automatic stabilizers. In contrast, 'Government spending on infrastructure' usually requires new government decisions and budget approvals, so it is not an automatic stabilizer.