An automatic stabilizer, known as an "intrinsic stabilizer", refers to an intrinsic function of the public finance system that helps to reduce income and volatility without changing policies.
This function of the fiscal system to automatically stabilize the economy is mainly reflected and played by the following circumstances.
1) Automatic change in income. This is mainly manifested in the automatic change of taxation. When the income level rises, the number of employed people increases, and the tax revenue automatically risesMoreover, in the case of progressive taxation, since the taxpayer's income enters a higher tax bracket, the increase in tax revenue will exceed the increase in income;**Automatic changes in income help curb inflation. Conversely, when income levels fall, the number of employed people decreases, and tax revenues automatically fall;Moreover, in the case of progressive taxation, the decline in tax revenue will exceed the decline in income due to the fact that the taxpayer's income enters a lower tax bracket;**Automatic changes in income help curb the recession. In short, the auto-scaling nature of taxation helps mitigate economic fluctuations.
2) **Automatic changes in expenditures, mainly in the form of changes in transfer payments such as unemployment benefits and other welfare expenses. When income levels rise, the unemployment rate decreases and unemployment benefits and other welfare expenditures decrease;When income levels fall, the unemployment rate rises and unemployment benefits and other welfare expenses increase. The automatic scalability of transfer payments helps mitigate economic volatility.
3) Agricultural products ** maintenance system.
When the economy is in a depression, the economy is booming.
The automatic stabilizer of the fiscal system is considered to be the first line of defense against economic fluctuations, and it acts as a shock absorber for economic fluctuations, but it is not enough to completely eliminate economic fluctuations. To eliminate economic volatility, we must rely on selective fiscal and monetary policies.
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