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.

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.
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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.
They emphasized that if downside risks materialize automatic stabilizers should be allowed to operate and short-term fiscal support would be warranted.
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.
Without automatic stabilizers or a strong financial-stability framework underpinned by deposit insurance, coping with the downside risks of the potentially destabilizing financial reforms that the government is pursuing will be difficult enough; a credit shock could prove disastrous.
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.
Alisdair McKay, Boston University, and Ricardo Reis, Columbia University and NBER, "The Role of Automatic Stabilizers in the U.
It would be much smarter to focus on the difference between cyclical and structural deficits, and to allow deficits that result from automatic stabilizers.
This level of budget deficit helps attain two goals - what are known as automatic stabilizers in the economy and budget will have an anticyclic effect and will support the economic activity in a time of crisis and potential recession in the European economy.
In the post-World War II period, business cycle fluctuations have moderated, reflecting changes in sectoral structure, automatic stabilizers, the use of lender-of-last-resort operations, and the use of discretionary counter-cyclical policies, among other factors.

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