An important automatic fiscal stabilizer in Canada is
A)the income- tax system.
B)the marginal propensity to import.
C)government purchases of goods and services.
D)the exchange rate.
E)the marginal propensity to consume.

Question

Quizplus · Accepted Answer

The income-tax system is an important automatic fiscal stabilizer in Canada. During a recession, automatic stabilizers like the income tax system work to stabilize economic activity. For example, as people's incomes decrease during a recession they are pushed into lower tax brackets, resulting in lower income taxes being paid. This reduction in taxes helps to offset the decline in consumer spending and helps to stabilize the economy.

An Important Automatic Fiscal Stabilizer in Canada Is