How Do Automatic Fiscal Stabilizers Function? What Do They Imply

question 21

Essay

How do automatic fiscal stabilizers function? What do they imply about the behavior of structural deficits over the business cycle? What do they imply about the behavior of cyclical deficits over the business cycle?

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Definitions:

GDP

Gross Domestic Product, a monetary measure of the market value of all final goods and services produced in a country during a specific time period.

Labor Productivity Growth

An increase in the amount of goods and services produced per hour by the workforce.

Great Depression

A severe worldwide economic downturn in the 1930s, marked by high unemployment and financial instability.

1980s

A decade marked by significant political, technological, and cultural changes, influencing global economics, international relations, and the rise of personal computing and digital technologies.