16. When output deviates from potential GDP, automatic stabilizers work to push the economy through the...

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16. When output deviates from potential GDP, automatic stabilizers work to push the economy through the work of automatic sta

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Answer 1

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Two example of automatic stabilizers are income taxes and unemployment benefits.

Income tax will increase as the output in the market increases and decrease as the output in the market decreases smoothening the consumption and Unemployment benefits will similarly increase at recession and decrease at time of boom this will also smoothen the consumption.

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