AP Macroeconomics 3.9: Automatic Stabilizers
Explain how taxes and transfer payments automatically moderate recessions and expansions without a new discretionary policy action.
- Syllabus
- Effective Fall 2025
- Course
- AP Macroeconomics
Covered syllabus points
3.9 Automatic Stabilizers question 1
[Maximum number: 1]
Assume that Nepal is in long-run macroeconomic equilibrium and has an open economy.
Assume instead that no discretionary policy actions are taken. Explain how automatic
stabilizers in the short run would reduce the effect of the change in real output shown on
your graph in part B.
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| D Point 5 | Explain that as real income rises, tax revenues will increase automatically (and/or transfer payments will decrease automatically), thereby slowing the rate at which disposable income is increasing, which will slow consumption growth. | 1 point |
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