How Are Automatic Stabilizers Used to Combat Inflation

The graph above shows 2 different progressive taxes. T2 is more progressive than T1 because the tax rate increases more rapidly as the income level increases. The more progressive tax, stabilizes the economy better.
Another way to stabilize demand - pull inflation is to reduce government spendings. Government spendings, are the spending that the government make with the tax revenues, and they add to the gross domestic product. An automatic stabilizer that will lower gross domestic product is welfare. As income rises, there are less people who need welfare, therefore reducing the amount of government spending, and lowering the gross domestic product.
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