Automatic Stabilizers

What are they?

• Policies that are already in place in an economy due to previously passed legislation, like income taxes and transfer payments.

• automatic stabilizers kick in automatically and do not need additional legislation to start working

Transfer Payments

• Are not counted in GDP (to count as GDP you need a good or service paying money out)

• Supposed to aid individuals who are most hurt in economic downturns

• Examples include unemployment benefits and welfare payments, which provide financial support during times of economic hardship.