automatic stabilizers

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Automatic Stabilizers

Systems that involuntarily shore up GDP without any action by a government. For example, when a recession occurs, taxes usually decrease because persons and corporations make less. This gives them extra money to spend or invest, which helps GDP remain higher than it would otherwise. Most economists agree that automatic stabilizers work in the short term. They are also called automatic fiscal stabilizers and built-in stabilizers.

automatic (built-in) stabilizers

elements in FISCAL POLICY that serve to automatically reduce the impact of fluctuations in economic activity. A fall in NATIONAL INCOME and output reduces government TAXATION receipts and increases its unemployment and social security payments. Lower taxation receipts and higher payments increase the government's BUDGET DEFICIT and restore some of the lost income (see CIRCULAR FLOW OF NATIONAL INCOME MODEL). See FISCAL DRAG.
References in periodicals archive ?
This support "acted as an automatic stabilizer that helped the economies to regain balance and protected the unemployed and vulnerable from economic disaster in the countries where it was extended", according to the report.
Also, when a nation's currency weakens, inward remittances rise and, as such, they act as an automatic stabilizer," said Kaushik Basu, Senior Vice President and Chief Economist of the World Bank.
In essence, since the CBT built the reserve option mechanism (ROM) in 2012, the Bank was hoping to rely on the ROM as an automatic stabilizer for the currency.
Tax transfers should also act as an automatic stabilizer in the case of asymmetric shocks.
That centralization of taxes and spending creates an automatic stabilizer for any region that experiences an economic downturn: the affected region's residents send less money to Washington and receive more in transfers.
I would simply say that automatic stabilizer spending is mandatory spending," he explained.
Surprisingly, the federal AMT already acts as an automatic stabilizer.
Washington, March 2 (ANI): New observations by scientists indicate that fruit flies use an automatic stabilizer reflex that helps them recover with precision from midflight stumbles.
Sargent considers Vroman's study in light of the automatic stabilizer role of unemployment insurance programs.
An important automatic stabilizer in the US economy is the progressive income tax.
Such a policy acts as an automatic stabilizer, restraining the economy during booms and stimulating the economy during recessions.
In the United States, for example, the significant role played by the central government in the collection of taxes and pattern of spending means that fiscal policy provides something of a regional automatic stabilizer, raising funds in one strong region and spending them in weaker regions.

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