Why are income taxes in Canada considered to be automatic stabilizers? Because
A)tax revenues increase when income increases,thereby offsetting some of the increase in aggregate demand.
B)tax revenues decrease when income increases,thereby intensifying the increase in aggregate demand.
C)tax structures can be changed when the Minister of Finance brings down a budget.
D)tax revenues are changed through discretionary fiscal policy to keep the budget balanced.
E)tax revenues are changed through discretionary fiscal policy to create surpluses in recessions.

Question

Quizplus · Accepted Answer

Income taxes in Canada are automatic stabilizers because tax revenues increase when income increases, which offsets some of the increase in aggregate demand. This helps to stabilize the economy during times of economic growth and prevent overheating. Additionally, when incomes decrease, tax revenues also decrease, which helps to support aggregate demand during recessions.

Why Are Income Taxes in Canada Considered to Be Automatic