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Banking Term: Automatic Stabilizer

Feb 6, 2015 14:18 IST

    Automatic Stabilizer is program that enhances and diminishes automatically for equalizing current economic trends without assistance of government. The best example for automatic stabilizer is unemployment insurance as it automatically replaces the lost income for people who have lost their jobs.

    Also, Automatic Stabilizers are features of the tax and transfer systems that tend by their design to offset fluctuations in economic activity without direct intervention by policymakers.

    Question

    1. Automatic stabilizers

    1. Keep the federal budget balanced
    2. Keep the federal high employment budget balanced
    3. Help to reduce the severity of recessions and inflationary boom periods
    4. Increases structural deficits over the business cycle
    5. Both C & D

    Ans: 1

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