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Chapter 30: Q.13 (page 741)

What is the main advantage of automatic stabilizers over discretionary fiscal policy?

Short Answer

Expert verified

Automatic stabilizers do not have the same time lags as discretionary fiscal policy.

Step by step solution

01

Step 1. Define fiscal policy.

Fiscal policy refers to the utilization of government spending and taxation that can impact the economy.

02

Step 2. Explanation

The use of automatic stabilisers over discretionary fiscal policy has the following advantages:

  1. Automatic stabilizers do not have the same time lags as discretionary fiscal policy.
  2. Automatic stabilizers are simple to fine-tune in order to bring the economy back to full employment.

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