Income taxes in Canada can be considered to be automatic stabilizers because tax

Question

Quizplus · Accepted Answer

As incomes increase, Canadians move into higher tax brackets and pay more in income taxes, which helps to offset some of the increase in aggregate demand. Similarly, during economic downturns, incomes decrease and taxpayers move into lower tax brackets, resulting in less income tax revenue for the government, which provides a boost to aggregate demand through increased disposable income for taxpayers. Therefore, income taxes in Canada can be considered automatic stabilizers as they automatically adjust to changes in the economy without requiring discretionary fiscal policy changes.

Income Taxes in Canada Can Be Considered to Be Automatic