Fiscal Policy Special
Economics In Ten
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Automatic Stabilizing Effects in a Recession
Automatic stabilizers is just an effect of having in place two things. If automatically people have an entitlement to benefit, it will mean that the worst of a recession may be less than somewhat. And similarly, most countries have these different thresholds at which you pay higher rates of tax. So some of those, that extra income, which might arise, join a boom, is siphoned off as people head upwards into higher tax thresholds. That has a stabilizing effect on the economy and perhaps lessens the more severe impacts of that could occur in an inflationary sort of boom. Yeah. Going back to say, a deficit situation where you're in a bust and then obviously the automatic stabilizers
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