AP Macroeconomics AMSCO Guided Notes

3.9: Automatic Stabilizers

AP Macroeconomics
AMSCO Guided Notes

AP Macroeconomics Guided Notes

AMSCO 3.9 - Automatic Stabilizers

Essential Questions

  1. How do automatic stabilizers moderate business cycles and impact aggregate demand and GDP?
I. What Are Automatic Stabilizers?

1. What are automatic stabilizers and how do they help moderate economic fluctuations?

2. What are four examples of automatic stabilizers used by the U.S. government?

II. Progressive Income Tax Structure

1. How does a progressive income tax system work and why is it considered an automatic stabilizer?

2. How do progressive income taxes help the economy during a recession?

3. What is the difference between progressive, flat-rate, and regressive taxes?

III. Unemployment Insurance

1. What is unemployment insurance and how does the Federal Unemployment Tax Act (FUTA) structure this program?

2. How does unemployment insurance function as an automatic stabilizer during a recession?

IV. Supplemental Nutrition Assistance Program

1. What is the Supplemental Nutrition Assistance Program (SNAP) and who are the primary recipients?

2. How does SNAP function as an automatic stabilizer for low-income households?

V. Medicaid

1. What is Medicaid and how is it funded and administered?

2. How did the Affordable Care Act expand Medicaid coverage and what was the impact on uninsured Americans?

VI. Government Transfers

1. What are government transfers and how do they serve as automatic stabilizers?

2. What is the Federal Poverty Line and how does it determine eligibility for welfare benefits?

3. How might a recession cause workers earning above the poverty line to become eligible for social service programs?

Key Terms

automatic stabilizers

income tax

progressive taxation

unemployment insurance

Supplemental Nutrition Assistance Program (SNAP)

Medicaid

government transfers

federal poverty line (FPL)