What are automatic stabilizers and how do they work? Q.What are automatic stabilizers and how do they work? A.Automatic stabilizers are features of the tax and transfer systems that temper the economy when it overheats and stimulate the economy when it slumps, without direct intervention by policymakers. Read more about What are automatic stabilizers and how do they work?
What characteristics make fiscal stimulus most effective? Q.What characteristics make fiscal stimulus most effective? A.Fiscal stimulus can raise output and incomes in the short run. To have the greatest impact with the least long-run cost, the stimulus should be timely, temporary, and targeted. Read more about What characteristics make fiscal stimulus most effective?
How do taxes affect the economy in the short run? Q.How do taxes affect the economy in the short run? A.Primarily through their impact on demand. Tax cuts boost demand by increasing disposable income and by encouraging businesses to hire and invest more. Tax increases do the reverse. These demand effects can be substantial when the economy is weak but smaller when it is operating near capacity. Read more about How do taxes affect the economy in the short run?
