Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.
Understanding
- I can define an automatic stabilizer in one sentence, using the idea that no new government decision is needed. (Guide: “The idea: a fiscal policy that runs itself”; Practice Q1)
- I can tell an automatic stabilizer from discretionary fiscal policy in a given example. (Guide: Worked example 3; Practice Q1)
- I can explain why tax revenue changes with real GDP even when tax rates stay the same. (Guide: “Taxes as automatic stabilizers”; Practice Q2)
- I can name transfer payments that act as automatic stabilizers and say which way they move in a recession and in an expansion. (Guide: “Transfer payments as automatic stabilizers”)
Calculation
- I can calculate the automatic change in tax revenue and in transfer payments from data. (Guide: Worked examples 1 and 2; Practice Q5(a), Q6(c)–(d))
- I can calculate the change in disposable income and the first-round change in consumption, and compare it with an economy without stabilizers. (Guide: Worked example 1; Practice Q3, Q5(c), Q6(d))
- I can compare the revenue from a proportional tax and a fixed tax when income changes. (Practice Q7(a)–(c))
Reasoning
- I can explain how falling tax revenue and rising transfers support consumption and moderate a recession. (Guide: Worked example 1; Practice Q6(e))
- I can explain how rising tax revenue and falling transfers slow consumption and help prevent overheating in an expansion. (Guide: Worked example 2; Practice Q5(c), Q7(d))
- I can draw an AD–AS graph showing that AD shifts by less with stabilizers, so real GDP and the price level change by less. (Guide: Figure 1; Practice Q6(a)–(b), (e))
- I can explain why stabilizers avoid the lags of discretionary policy but do not, on their own, close an output gap. (Guide: “Strengths and limits”; Practice Q4)
All ticked? Move on to Topic 4.1, Financial Assets, or return to the course roadmap.