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31 January, 01:24

The federal budget deficit acts as an automatic stabilizer because

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  1. 31 January, 02:21
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    tax revenues decrease during a recession

    Explanation:

    Automatic stabilizer refers to policies to control the fluctuation in the economy

    During a recession, the income that average people have would automatically decrease. Since the amount of federal budget is reliant on the amount of income taxes

    To stabilize this, the government reduce the amount of federal budget and let the people keep a larger portion of their money so they can invest it in their own business.
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