Which of the following is an automatic stabilizer that reduces tax receipts during a recession?
A)Welfare benefits.
B)Medicaid.
C)Corporate and individual income taxes.
D)Indexed retirement and Social Security benefits.

Question

Quizplus · Accepted Answer

Corporate and individual income taxes are automatic stabilizers that reduce tax receipts during a recession. During a recession, corporate and individual incomes decrease, resulting in lower tax revenues collected from these sources. This reduction in tax collections helps to buffer the economy during times of economic downturn. Welfare benefits and Medicaid are not automatic stabilizers as they require legislative action to expand during a recession, while indexed retirement and Social Security benefits are not automatic stabilizers that reduce tax receipts during a recession.

Which of the Following Is an Automatic Stabilizer That Reduces