what is an automatic stabilizer 
automatic stabilizers are a type of fiscal policy designed to offset fluctuations in a nation s economic activity through their normal operation without additional timely authorization by the government or policymakers the best known automatic stabilizers are progressively graduated corporate and personal income taxes and transfer systems such as unemployment insurance and welfare automatic stabilizers are called this because they act to stabilize economic cycles and are automatically triggered without additional government action understanding automatic stabilizersautomatic stabilizers are primarily designed to counter negative economic shocks or recessions though they can also be intended to cool off an expanding economy or to combat inflation by their normal operation these policies take more money out of the economy as taxes during periods of rapid growth and higher incomes they put more money back into the economy in the form of government spending or tax refunds when economic activity slows or incomes fall this has the intended purpose of cushioning the economy from changes in the business cycle automatic stabilizers can include the use of a progressive taxation structure under which the share of income that is taken in taxes is higher when incomes are high the amount then falls when incomes fall due to a recession job losses or failing investments for example as an individual taxpayer earns higher wages their additional income may be subjected to higher tax rates based on the current tiered structure if wages fall the individual will remain in the lower tax tiers as dictated by their earned income similarly unemployment insurance transfer payments decline when the economy is in an expansionary phase since there are fewer unemployed people filing claims unemployment payments rise when the economy is mired in recession and unemployment is high when a person becomes unemployed in a manner that makes them eligible for unemployment insurance they need only file to claim the benefit the amount of benefit offered is governed by various state and national regulations and standards requiring no intervention by larger government entities beyond application processing automatic stabilizers and fiscal policy