Question

Identify an “automatic stabilizer” and describe the impact it has had on the economy in recent years.

Answer 1

• Economic policies and programs that brings fluctuations in nation's Economic activity.
• Best known Automatic stabilizers are corporate and personal taxes, transfer systems such as Insurance, unemployment and welfare.

Unemployment, Insurance and welfare:-

• Benefits received by workers if they have lost their jobs.
• Workers who terminate the Employment or the self Employed ones are not Eligible for their insurance.
• They can avail personal funds.
• State governments are responsible for the payment of unemployment insurance.
• It is a joint program initiated by Individual state governments and federal government.
• Every state has an unemployment insurance program.
• All states must follow guide lines put forward by federal law.
• Workers who meet the eligibility criteria will receive 26 weeks of cash benefits.
• State fund unemployment insurance using taxes is put on the Employers
• The state must also give minimal Employee contributions to the state Employment fund .
• Two primary requirements to be met for unemployment insurance benefits.

1. Individual must meet a threshold of either earned wages or time worked in a base period.
2. Person must be Unemployed without his fault of his own.