Automatic stabilizers are government programs or policies that counteract the business cycle automatically. During an economic downturn, they stimulate the economy by increasing spending or reducing taxes (e.g., unemployment benefits, progressive income tax). During an upturn, they restrain the economy by decreasing spending or increasing taxes.
Which one of the following functions as an automatic stabilizer in the context of fiscal and monetary policies of an economy?
Asked in UPSC CAPF 2021 · Topic: Fiscal Policy & Revenue (Impact of Fiscal Policy on Income Distribution, Inflation, and Employment)
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