Automatic fiscal policy operates as the economy moves along its business cycle.
The use of taxing and expenditure by the government to affect a nation's economy is known as fiscal policy. Governments often work to decrease poverty and encourage strong, sustainable growth through the employment of fiscal policy.
Monetary policy, which regulates interest rates and the amount of money in circulation, works in tandem with fiscal policy and is often overseen by a central bank. To boost aggregate demand and spur economic growth during recessions, the government may adopt an expansionary fiscal policy by decreasing tax rates. Automatic fiscal policy is implemented in accordance with the economy's business cycle.
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