Question

Do automatic fiscal stabilizers eliminate business cycles?

Solution

Verified
Answered 2 months ago
Answered 2 months ago

Automatic Stabilizers are built into the system to operate automatically without authorization from the government or Congress. These policies are designed to stabilize the economy automatically. The business cycle, on the other hand, is the fluctuations of a country's economic activity. The growth and decline of the Gross Domestic Product (GDP) mark the start and end of a cycle.

The automatic stabilizers do not eliminate the business cycle, instead, they support the economy by cushioning the changes resulting from these fluctuations.

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