Supporters of Policy Rules Argue That Automatic Stabilizers Are Sufficient

question 6

Essay

Supporters of policy rules argue that automatic stabilizers are sufficient to reduce the effects of recessions and expansions and have the added advantage of avoiding the lags associated with discretionary policy. Explain, making reference to an aggregate demand inflation diagram, how the automatic stabilizers can influence real GDP and reduce the size of economic fluctuations.

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Definitions:

Diabetes

A chronic condition characterized by elevated levels of glucose in the blood due to the body's inability to produce or effectively use insulin.

Health Problem

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A person's willingness and preparedness to make alterations in their behavior or lifestyle.

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The act of evaluating or determining the nature, ability, or quality of something.