Question

What are the consequences of automatic stabilizers when real GDP increases?
Choose one:
A. Tax revenues decrease and payments to individuals increase.
B. Tax revenues rise and then fall while payments to individuals fall and then rise.
C. Tax revenues decrease and payments to individuals decrease.
D. Tax revenues increase and payments to individuals decrease.
E. Tax revenues increase and payments to individuals increase.

Answer 1

Answer:

C. Tax revenues decrease and payments to individuals decrease.

Explanation:

Automatic stabilizers acts as shock absorbers and reduce the impact in an economy.

Automatic stabilizers are ongoing government policies that automatically adjust tax rates and transfer payments in a manner that is intended to stabilize incomes, consumption, and business spending over the business cycle