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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

Give an example of a government policy that acts as an automatic stabilizer. Explain why the policy has this effect.

To determine

Automatic stabilizers.

Explanation

Examples of automatic stabilizers include the tax system and some government spending in the form of unemployment insurance benefits, welfare benefits, and so forth. When the economy goes into recession, incomes, earnings, and profits, all fall and the government’s taxes also fall as a result (because they depend on these incomes)...

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