Automatic stabilizers

Question

Quizplus · Accepted Answer

Automatic stabilizers are programs or policies built into the economic system that help stabilize economic activity without requiring legislative action. Examples include unemployment benefits, which increase during recessions and decrease during expansions, and progressive income tax systems, which automatically adjust to changes in income. These stabilizers affect national income, the unemployment rate, and other macroeconomic measures by providing a cushion during economic downturns and helping to curb inflation during booms. They work both during contractions and expansions, and do not require specific action from lawmakers.

Automatic Stabilizers