Automatic stabilizers refer to

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Automatic stabilizers are government spending and taxes that automatically increase or decrease along with the business cycle. For example, during an economic downturn, unemployment increases, and therefore, more people are eligible for unemployment insurance benefits. As a result, government spending on unemployment benefits automatically increases. Additionally, during an economic upswing, more people are employed and generating income that is taxed, leading to an automatic increase in government tax revenue. Automatic stabilizers work without any specific government action and help stabilize economic activity.

Automatic Stabilizers Refer to