They help stabilize the economic situation of a given country by mitigating the negative effects resulting from fluctuations in business cycles. Automatic economic stabilizers include, for example: Income tax; Corporate tax; Social security contributions; Unemployment benefit; social benefits; Indirect taxes VAT, excise duty, customs duty.
Their function is to enable the accumulation of income and the philippines photo editor achievement of a budget surplus in times of favorable economic conditions. Thanks to this, it is possible to achieve economic growth, increase production, employment and wages. In turn, during a recession, less tax revenue flows into the budget and spending on social transfers increases. They are intended to stimulate society's consumption and maintain demand at optimal levels. Expansionary fiscal policy It is used in situations of economic crises and recessions.
The government then increases budget spending and reduces taxes and interest rates. In this way, it is expected that the economy will revive and GDP will increase. Restrictive fiscal policy It is based on reducing government spending e.g. on the development of education, culture or modernization of the armed forces , increasing tax rates and interest rates. It is practiced during an upturn in the business cycle.