As the economy declines into recession, the collection of personal income tax revenues automatically falls. This phenomenon best illustrates how a progressive income-tax system
A. offsets the timing problem for fiscal policy.
B. increases crowding out in the economy.
C. decreases real interest rates in the economy.
D. serves as an automatic stabilizer for the economy.
Answer: D
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Which of the following is a possible explanation for the fall in prices after an industry is monopolized by combining a group of competitors?
a. A monopolist faces a downward sloping demand curve. Hence, output expansion leads to lower prices. b. A reduction in price increases producer surplus. Hence a monopolist may reduce the price of his product. c. A monopolist may reduce prices to make it difficult for other firms to compete. d. A monopolist can increase profits by reducing price when its cost of production declines due to increased size of the new firm. The fall in price is less than the decline in cost.
The Federal Reserve System is owned by the U.S. Department of the Treasury
Indicate whether the statement is true or false
Why is the supply of loanable funds often interest inelastic?
The most responsive to interest rate changes is the _______ demand for money.
A. transactions B. precautionary C. speculative