automatic stabilizers

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 ?
Likewise, many observers advocate bolstering "automatic stabilizers" such as unemployment benefits.
"This way, automatic stabilizers and fiscal stimulus can be deployed again, should downside risks materialize.
Units include a battery discharge indicator, integral charger, overload relief valve, and automatic stabilizers that lock into place when the load is approximately 15 inches high.
The few studies attempting to identify the determinants of fiscal stimulus relied entirely on economic indicators such as the output gap, automatic stabilizers or the fiscal space (Ahrens 2009; Horton and Ivanova 2009, Prasad and Sorkin 2009).
Section III provides a framework for calculating the contribution of automatic stabilizers to the deficit.
China's lack of automatic stabilizers places the tension between reform objectives and growth imperatives in sharp relief.
The automatic stabilizers should continue to play fully if the economy under or over-perform current expectations," it expected.
During a recession, government spending faces competing forces, as lower levels of economic activity result in lower revenues and, simultaneously, automatic stabilizers such as unemployment benefits begin to increase as the labor situation deteriorates.
If the surplus target had been expressed as a target for net lending in particular years, it would have been necessary to tighten fiscal policy when the economy entered a recession and to give fiscal policy an expansionary stance in a booming economy in order to counteract the automatic stabilizers. (35)
* Alisdair McKay, Boston University, and Ricardo Reis, Columbia University and NBER, "The Role of Automatic Stabilizers in the U.S.
The government might have supplemented these "automatic stabilizers" with new spending or by lowering tax rates, further increasing the fiscal deficit.

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