When output deviates from potential GDP, automatic stabilizers work to push the economy:

Question

Quizplus · Accepted Answer

Automatic stabilizers are built-in features of the economy that respond to changes in output without the need for discretionary policy. Examples include unemployment insurance and progressive income taxes. These stabilizers help to dampen the effects of business cycles and push the economy back towards its long-run equilibrium. When output deviates from potential GDP, automatic stabilizers work to push the economy in the same direction that discretionary policy would, but without the need for explicit government action.

When Output Deviates from Potential GDP, Automatic Stabilizers Work to Push