When government tax revenues change automatically and in a countercyclical direction over the course of the business cycle, this is an example of:
A)impounding.
B)built-in stability.
C)money creation.
D)the full-employment budget.

Question

Quizplus · Accepted Answer

The description given in the question refers to built-in stability, which is the automatic stabilizer function of the government's fiscal policy. As the business cycle fluctuates, tax revenues change automatically due to changes in economic activity, without any government intervention. This helps to stabilize the economy and reduce the impact of economic fluctuations on employment and output. The other options are not applicable in this scenario as impounding refers to the withholding of funds by the government, money creation refers to the process of creating new money supply, and the full-employment budget is a concept used to estimate the level of government expenditure required to achieve full employment.

When Government Tax Revenues Change Automatically and in a Countercyclical