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.


Answer: D

Economics

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