Jasper has been working a lot of overtime during the most current economic expansion. As a result, his income is high enough for him to move from the 12 percent tax bracket to the 22 percent tax bracket. The increased amount Jasper pays to the government is an example of:
A) discretionary fiscal policy slowing the economy.
B) an automatic stabilizer slowing the economy.
C) discretionary fiscal policy encouraging economic activity.
D) automatic stabilizers encouraging economic activity.

Question

Quizplus · Accepted Answer

The increased amount Jasper pays to the government as he moves into a higher tax bracket due to his higher income is an example of an automatic stabilizer. Automatic stabilizers are economic policies and programs, such as progressive taxation, that automatically adjust to economic conditions without the need for explicit government action. In this case, as Jasper's income increases during an economic expansion, he pays more in taxes, which can help to moderate the expansion and stabilize the economy, hence acting as an automatic stabilizer.

Jasper Has Been Working a Lot of Overtime During the Most