When economic activity slows or earnings drop, they inject additional money into the economy via government expenditure or tax refunds.The economy is supposed to be protected from changes in the economic cycle by doing this.
What is the purpose of automatic stabilizers?
- People's reactions to recessions are tempered by automatic stabilizers, which also help them survive if they lose their employment or their businesses suffer.
- They also serve a crucial macroeconomic function by stimulating aggregate demand when it lags, which helps shorten and lessen the severity of downturns compared to how they would otherwise .The known automatic stabilisers include corporate and personal income taxes that are graduated over time, as well as payment programs like welfare and unemployment insurance.
- Because they moderate economic cycles and activate automatically without additional government intervention, automatic stabilisers are so-called.
- Automatic stabilizers work to reduce private sector expenditure during a strong economic expansion by raising tax revenues and decreasing welfare spending.
To learn more about automatic stabilizers refer
https://brainly.com/question/25558588
#SPJ4
