Question

Economist Mark Thoma has​ written, "One of the difficulties in using fiscal policy to combat recessions is getting Congress to agree on what measures to implement. ... Automatic stabilizers bypass this difficulty by doing exactly what their name​ implies." ​Source: Mark​ Thoma, "The Importance of Automatic Stabilizers to the​ Economy," cbsnews​, January​ 25, 2010. Automatic stabilizers are:

Answer 1

Answer:

Automatic stabilizers are policies that adjust, as the name implies, automatically, to economic conditions.

An example of an automatic stabilizer is a progressive tax scheme that adjusts rates depending on whether the economy is growing or in recession. If the economy is growing, the tax rates will rise for those who are earning more income, and if the economy is in recession, the tax rates will go down for everyone.

Another example is unemployment benefits. They will increase when the economy is doing poorly and more people are unemployed, and the will decrease in the opposite situation.

The biggest advantage of automatic stabilizers is, as economist Mark Thoma explains, that they do not need to pass through congress to become effective.