What are automatic stabilizers?
- Features of the economic policy that help automatically stabilize the economy during economic fluctuations
- They work to offset economic downturns and upswings without the need for policy actions
- Such as unemployment compensation for workers laid off during a recession. It allows the government to provide income in order to maintain consumption, stabilizing the economy
- Another is the progress tax policy which allows for a decrease in government taxes during recessions and increase during economic expansions
How Do I Remember it?
Just reading the name itself, it is a way that the economy can stabilize itself automatically without the need of the government taking action or setting new policies, the economy simply stays balanced due to these stabilizers.
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