Income taxes are an automatic stabilizer because when income rises,ceteris paribus,tax receipts
A)Fall because automatic stabilizers work against the cyclical movements of the GDP.
B)Rise because taxes are computed on the basis of income.
C)Fall because income taxes are regressive.

Question

Quizplus · Accepted Answer

Income taxes are computed on the basis of income, so as income rises, tax receipts also rise. This acts as an automatic stabilizer as it helps to stabilize the economy by reducing the magnitude of economic fluctuations.

Income Taxes Are an Automatic Stabilizer Because When Income Rises,ceteris