A shock absorber which makes disposable income, and thus consumer spending, less sensitive to fluctuations in GDP is called......

Option 1 -> Mechanisms that automatically reduce income volatility without new government action.

Option 2 -> A tool of fiscal policy but not the specific shock-absorbing mechanism.

Option 3 -> Broad category including both automatic and discretionary measures.

Option 4 -> Central bank policies affecting interest rates and money supply.

Hence, Automatic stabiliser -> Automatic stabilizers are built-in economic mechanisms that naturally counteract fluctuations in economic activity without requiring explicit government intervention. Examples include progressive income taxes (which automatically take a larger percentage during economic booms and less during recessions) and unemployment benefits (which automatically increase payments during downturns). These mechanisms act as shock absorbers by making disposable income, and consequently consumer spending, less volatile than GDP itself, thereby stabilizing the economy automatically -> correct