This is highly used in the range of economy especially for a particular region i. For example , the factor may be the employment crisis, the insurance claim and the profit and benefit. It is always governed by the government of the particular country for the improvement of living standard and in the increase of economy values. This in turn will boost the economic activity and hence the economy is recovered from the problem of the recession leading to the high range of productivity and employment crisis.
Automatic Stabilizer is compared to be more effective when compared to the discretionary fiscal policy. The discretionary policy is subjected to the political basis and the implementation is complex. The Automatic Stabilizer has the following advantages:. In the business cycle, it reduces the fluctuations automatically when the recession effects takes place. The government concentrates highly on the factors like unemployment, food stamps and welfare and spends more which helps in boosting the consumption of the households.
It leads to the reduction in the size of the contraction of the economy. When the income level of the individual decreases, the tax taken for the US will be in deceased state.
These concepts are highly used in the government and in other problems related to the welfare of the economy. The Automatic Stabilizer in economy has the following disadvantages:. Because of the recession, the expenses on the household increases, leading to the increase of the tax revenue of an individual. This method is just a temporary process and is an anticipated process. There is a loss of study and importance of Automatic Stabilizer as fiscal study is considered as the slow process.
The working of a nation during the recession is taken as one of the popular Automatic Stabilizer examples. When a country experiences an economic downturn, unemployment increases. The loss of work and jobs in high level. Hence, more people register for the unemployment and for the economic welfare that increase the aggregate demand spent by the government. For improving and implementing the stabilizer, we make use of simulation models that are called as macro models.
Those models express the cross-sectional difference of economic stabilizer that is calculated using the semi-elasticity budget balance.
Monetary and fiscal policy is used for compensating the defect in the Automatic Stabilizer. This datasheet is varied for the different countries with certain factors and it is an anticipated process.
Another method for expression the effectiveness is the cross-sectional difference of the degree of the economic stabilizer that makes use of size of the government. Various values that are used in the measurement are output in y, consumption in c, wages in w and investment in e. Clear pattern is not possible when it comes to the various terms like revenue and budget. The relationship between the government size and national economy is stronger for the developed country when compared to the developing country.
Some theory is possible in this type of stabilizer and they are as follows:. Keynesian model implementation involving the cost of adjustment. If the country is well developed then the GDP stabilization is high which in turn increases the degree of rigidity. Introduction of the rule-of-thumb concept for consumers generates a stabilizing effect for the size of the government. RefWorks is free for university members: How do you alphabetize your name in bibliographies? EasyBib — free automatic bibliography and citation maker; EndNote.
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