Automatic Stabilizers and Their Effects

According to an essay written by Carl Walsh and published online by the Federal Reserve Bank of San Francisco, automatic stabilizers are a tool used to dampen fluctuations in real GDP without any explicit policy action by the government. The term automatic stabilizer refers to the fact that the stabilizers act without explicit authorization from the Congress or from the President.

In addition to automatic stabilizers, the federal government may make discretionary changes in the face of