Give Two Examples of Automatic Stabilizers,and Explain Why They Are

question 71

Essay

Give two examples of automatic stabilizers,and explain why they are an important component of fiscal policy.

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Definitions:

Engel Curves

Graphical representations showing how household expenditure on a good varies with income.

Backward-Bending

Describes a labor supply curve that bends backwards at higher wage rates, indicating that higher wages can lead to a decrease in labor supplied due to income effects.

Engel Curve

A graphical representation showing the relationship between a consumer's income and the quantity of a good consumed, keeping all other factors constant.

Total Effect

The overall impact on a dependent variable when one or more independent variables change.