All of the following are automatic fiscal stabilizers EXCEPT Select one: a. lower global tax revenues during a recession. B a reduction in unemployment insurance contributions during a
expansion. vs. a mandatory reduction in tax rates by Congress to encourage
the economy. D. an increase in unemployment expenditure over a
recession.
Ans C: A mandatory congressional reduction in tax rates for
stimulate the economy.
A tax cut imposed by Congress to encourage
the economy is not automatic, but deliberately made by the government.
Automatic stabilizers are revenue and expense items that
automatically adapt to cyclical changes in the economy – such as during
recession tax revenue will drop and unemployment insurance
will increase. The changes have a direct impact on the revenues of the
businesses and homes. The effect of automatic stabilizers
will depend on the size of the government, but also on the responsiveness
taxes and expenses are for cyclical changes.
decisions are needed and implementation delays are minimized.