Unit 3.6 · Demand Management (Fiscal Policy)
Automatic Stabilizers (HL only)
AO3HL
Syllabus Requirement
Includes progressive taxes and unemployment benefits that stabilize the economy without active policy changes.
Assessment Objectives
AO3Synthesis and Evaluation
HLThis topic is assessed at Higher Level only.
Summary
Automatic stabilizers are components of fiscal policy that help to smooth out fluctuations in economic activity, contributing to a more stable growth rate in real national output. They work by automatically adjusting government spending and tax revenues in response to changes in the economy, thus mitigating the effects of economic cycles.