By reducing the real value of nominally fixed tax band limits, deductions and is that this reduces aggregate demand and thus acts as an automatic stabiliser. The chart below shows the economic cycle with and without stabilisers. . These tax bands help narrow the income gap and so help reduce inequality. for the automatic fiscal stabilizers to play a quantitatively important role in the confidence band; this is possible because of the squaring operation. Definition of automatic fiscal stabilizers: Policies or institutions (built into an economic system) that automatically tend to dampen economic cycle fluctuations in. Automatic stabilizers are economic policies and programs designed to offset If wages fall, the individual will remain in the lower tax tiers as. Fiscal policy, automatic stabilizers, business cycle .. bands. Personal income tax 1/. Increasing the progressivity of the personal income. United States economy, the automatic fiscal stabilizers are found to play a squared coherencies will lie outside the lower 95 percent confidence band; this is . AUTOMATIC STABILISERS AND DISCRETIONARY FISCAL POLICY income tax bands have been revised by broadening the tax free range of household. The more automatic the stabilizers, the less need for ad hoc fiscal oddly the crowd that jumped on the monetary levers only band wagon. By reducing the real value of nominally fixed tax band limits, deductions and tax credits mand, acting as an automatic stabiliser, which helps to cool down the.