In the fiscal policies of governments, automatic stabilizers are meant to correct and stabilize the fluctuations that arise within the economy of nations. The policy tools that are considered automatic stabilizers are;
- A progressive income tax structure
- Government unemployment benefits
At times, the economy of a nation might experience shocks and destabilizations. These policy tools listed above are meant to generate taxes from the citizens that would cushion the effects of these shocks.
They help to increase the flow of money in the economy when it is passing through difficulties like recessions.
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