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.
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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.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
* Marco Di Maggio, Columbia University, and Amir Kermani, University of California, Berkeley, "The Importance of Unemployment Insurance as an Automatic Stabilizer"
Carving out the automatic stabilizer effect from total fiscal policy would thus identify the ad-hoc policy size.
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.
The results suggest that the EITC serves as an automatic stabilizer for married couples with children but not for households with a single parent and children, who constitute the majority of recipients.
Also, when a nation's currency weakens, inward remittances rise and, as such, they act as an automatic stabilizer," he added.
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.
To see how the AMT works as an automatic stabilizer in this framework, note that because social insurance programs are normal goods, when the individual's income increases, so does his demand for the program.
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.
Debt linkage to wages is likely to serve as an automatic stabilizer (negative feedback), since when the standard of living improves, one effectively pays more, and when it decreases one effectively pays less.

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