328
MACROECONOMICS
Automatic stabilizers also cushion the impact of shocks—unanticipated
sudden changes—on the economy. A reduction in business confidence, for
instance, shifts the aggregate demand curve to the left. The magnitude of
this shift is, however, reduced by the presence of automatic stabilizers. Such
smaller shifts of the aggregate demand curve reduce the variability of eco-
nomic fluctuations.
D
ISCRETIONARY
FISCAL
POLICY
is the deliberate and conscious use of government
expenditure and tax decisions to influence the course of the economy. This aspect
of fiscal policy is subject to long inside lags of recognition and ...
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