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Essay text:
An automatic stabilizer, that is beneficial to combat such a
problem, is a progressive tax. A progressive tax, is a tax that becomes a
higher rate for each increasing level of gross domestic product. If such a tax
is present within the economy, when the society becomes more prosperous, such as
in the situation with demand-pull inflation, the citizens are taxed more,
therefore decreasing the marginal propensity to consume, and decreasing
consumption. The marginal propensity to consume is the fraction of any change
in disposable income spent for consumer goods. If this decreases, demand will
not be as high above, or even above where the supply is, therefore reducing the
demand - pull inflation...
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