In fiscal policy, what are automatic stabilizers? Give two examples.

In fiscal policy, what are automatic stabilizers? Give two examples.

Expert Solution

Fiscal policy is used by the government and for fiscal policy government either change government expenditure or change in the taxes.

In Contractionary fiscal policy, therefore government either decreases the government spending or increase tax.

Since the expansionary fiscal policy means either an increase in the government expenditure or decrease in the tax. This policy is used for increasing aggregate demand.

Since the automatic stabilizers can be defined as an economic policies and programs which are formed for offsetting fluctuations in a nation's economic activity without intervention by the government or policymakers.

The automatic stabilizers examples are corporate and personal taxes, and transfer systems such as unemployment insurance and welfare. These are called automatic stabilizers because they act to stabilize economic cycles and are automatically triggered without explicit government action.

Rahul Sunny answered 2 years ago

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