Transfer payments

Question

Transfer payments

Quizplus · Accepted Answer

Transfer payments, such as welfare or unemployment benefits, act as automatic stabilizers during economic downturns. They help to maintain the disposable income of households, which in turn supports consumption and helps to prevent a more severe decline in demand. Transfer payments are not exclusively a discretionary stabilizer, but rather operate automatically as part of the government’s fiscal policy framework. They can be progressive in nature, depending on how they are designed, but their main purpose is to support economic stability during both expansionary and recessionary periods.

Transfer Payments