Write a two-page essay on the role of automatic stabilizers. In your essay include comments on the following points:
a. What are automatic fiscal stabilizers? How do these stabilizers stabilize real GDP in the face of AD and AS shocks?
b. What is the role of the simple multiplier [ 1/{1 – MPC(1 – t) – m}] in stabilization of the swings in real GDP?
c. How the slope of the AD curve affects the stability of real GDP in the presence of AS shocks?
d. How the automatic stabilizers depend on the sizes of MPC, t, and m.