Automatic Stabilizers

Automatic stabilizers are economic features that help stabilize an economy without direct government intervention. When the economy slows down, these stabilizers, such as unemployment benefits and progressive taxation, automatically provide support. For example, during a recession, more people qualify for unemployment benefits, increasing government spending and helping boost demand. Conversely, in a booming economy, higher incomes result in more tax revenue, reducing spending. This automatic adjustment helps manage economic fluctuations, maintaining growth and reducing the impact of recessions, ultimately contributing to economic stability.