All of the following are automatic fiscal stabilizers except

All of the following are automatic fiscal stabilizers EXCEPT Select one: a. a decrease in overall tax revenues during a recession. b. a decrease in unemployment compensation payments during an expansion. c. a congressionally mandated decrease in tax rates to stimulate the economy. d. an increase in unemployment expenditures during a recession.

Answer

Ans C :a congressionally mandated decrease in tax rates to stimulate the economy. A congressionally mandated decrease in tax rates to stimulate the economy is not auromatic but purposely done by govt.

The automatic stabilizers are revenue and ependiture items that adjust automatically to cyclical changes in the economy—like during recession tax collections will fall, and unemployment insurance will increase. The changes have a direct impact on the income of businesses and households. The effect of the automatic stabilizers will depend on the size of government but also on how responsive taxes and expenditures are to cyclical changes.No political decisions are required, and implementation lags are minimized.

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