Consider the economies of Macmillana and Bloedelo, which are identical except that the multiplier in Macmillana is smaller than that in Bloedelo. This means that Macmillana's GDP is Bloedelo's GDP to fluctuations in the components of total spending. Features of the economy that reduce its sensitivity to shocks are called automatic stabilizers. Suppose again that the economies of Macmillana and Bloedelo are identical except that Macmillana has instituted a system of unemployment insurance, whereas Bloedelo hasn't. Macmillana's economy is sensitive to fluctuations in GDP than Bloedelo's economy. This is because the system of unemployment insurance has Macmillana's multiplier.
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Home » Business » Consider the economies of Macmillana and Bloedelo, which are identical except that the multiplier in Macmillana is smaller than that in Bloedelo. This means that Macmillana's GDP is Bloedelo's GDP to fluctuations in the components of total spending.