How Are Automatic Stabilizers Used To Combat Inflation?

Below is a free term papers summary of the paper "How Are Automatic Stabilizers Used To Combat Inflation?." If you sign up, you can be reading the rest of this term papers in under two minutes. Registered users should login to view this term paper.

Term Paper Title	How Are Automatic Stabilizers Used To Combat Inflation?
# of Words	496
# of Pages (250 words per page double spaced)	1.98

How are Automatic Stabilizers Used to Combat Inflation?

     In today’s economy, there are devices present called automatic stabilizers.  Automatic stabilizers, are mechanisms which aid in the correction of an economic problem without the interference of anyone or anything.  They are perhaps most useful to combat demand - pull inflation.  Demand - pull inflation, is when prices rise because the economy cannot produce enough goods to satiate the economy.  An automatic stabilizer, that is beneficial to combat such a problem, is a progressive tax.  A progressive tax, is a tax that becomes a higher rate for each increasing level of gross domestic product.  If such a tax is present within the economy, when the society becomes more prosperous, such as in the situation with demand-pull inflation, the citizens are taxed more, therefore decreasing the marginal propensity to consume, and decreasing consumption.  The marginal propensity to consume is the fraction of any change in disposable income spent for consumer goods.  If this decreases, demand will not be as high above, or even above where the supply is, therefore reducing the demand - pull inflation.
                       AS
  P2                                                C1
  P1                            A.D.2                             C2
                         AD1
                              45 deg.

The first graph shows the increase of price, due to the increase of demand in the vertical range of the aggregate supply curve, or demand pull inflation.  The second graph shows the decrease of consumption due to the increase in the tax rate at the new higher income.
        Tax               T2
     Rate               T1
                                                    G
                          ...

This is not the end of the termpaper! Register below to see the complete version of this term paper.

Membership Plans	Credit Card	Check

1 month membership

3 month membership (You Save 50%)

6 month membership (You Save 67%)

Copyright © 2002-2007 Mid Term Papers. All rights reserved. This term papers website is used for research purposes only.
If you have forgotten your username or password, please click here.
If you like to cancel your account, please click here.

1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9 - 10 - 11 - 12 - 13 - 14 - 15 - 16 - 17 - 18 - 19 - 20 - 21 - 22