Macroeconomics › Section Q · Government budgets and fiscal policy › Topic Q.5
Automatic stabilizers
Some fiscal policy needs no vote at all. Taxes and benefit programmes already on the books loosen the budget when the economy weakens and tighten it when the economy booms, acting like shock absorbers on the business cycle.
In this topic
- Two kinds of fiscal policy
- The tax side
- The spending side
- Worked example: one household's cushion
- Stabilisers in the AD/AS model
- Bigger government, stronger stabilisers
- The cyclically adjusted budget
- Worked example: splitting a deficit
- Fast, but only partial
- Common mistakes to avoid
- Key takeaways
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