Robert lost his job during the last recession and his yearly income fell by 15 percent.As a result of the action of automatic stabilizers,his disposable income fell by less than 15 percent.

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Automatic stabilizers are policies or mechanisms that are built into the economy in order to automatically respond to economic downturns, such as recessions, and stabilize output and employment. Examples include unemployment insurance payments, progressive income taxes, and government transfer payments. These policies help to cushion the impact of economic shocks on households and businesses, and limit the depth and duration of economic downturns. One way in which automatic stabilizers work is by reducing the severity of income declines during recessions, such as in the case of Robert losing his job. Although his income fell by 15 percent, his disposable income (income after taxes and transfers) likely fell by less than 15 percent due to the effects of automatic stabilizers. For example, he may have received unemployment insurance payments, which would partially replace his lost income and reduce the overall income decline.

Robert Lost His Job During the Last Recession and His