Which of the following is an example of an automatic stabilizer?
A) Congress legislates lower tax rates to increase consumption and investment.
B) Tax rates are increased during a recession to maintain a balanced budget.
C) A regressive income tax system reduces tax revenues (as a share of income) as income expands.
D) Revenues from the corporate income tax increase sharply during a business boom but decline substantially during a recession, even though no new tax legislation has been enacted.

Question

Quizplus · Accepted Answer

Automatic stabilizers are economic policies and programs that counteract the effects of economic fluctuations without additional government action. Option D describes how corporate tax revenues naturally increase during booms and decrease during recessions, which is characteristic of an automatic stabilizer.

Which of the Following Is an Example of an Automatic