How Are Automatic Stabilizers Used To Combat Inflation?

Want to read the rest of this paper? Join Essayworld today to view this entire essay and over 50,000 other term papers

spendings, are the spending that the government make with
the tax revenues, and they add to the gross domestic product. An automatic
stabilizer that will lower gross domestic product is welfare. As income rises,
there are less people who need welfare, therefore reducing the amount of
government spending, and lowering the gross domestic product.
Due to such automatic stabilizers as progressive tax rates and the
decrease of government spending due to welfare, therefore a decrease in
government borrowing, therefore a decrease in the demand for the dollar,
therefore a decrease in the interest rate, which would cause a decrease in the
foreign demand for dollar, which would cause the dollar to depreciate, therefore
lowering inflation due to a less valuable dollar.
Using automatic stabilizers causes the government to be able to put less
work in the US fiscal policy. Also, it saves time in fixing an economic problem,
because discretionary fiscal policy (policy in which the government ...

Get instant access to over 50,000 essays. Write better papers. Get better grades. Already a member? Login

CITE THIS PAGE: