Transfer payments made by governments over the business cycle in the United States
A) move procyclically with GDP because they are constructed to increase or decrease automatically as tax receipts climb or fall with GDP.
B) move countercyclically with GDP because they are constructed to increase or decrease automatically as changes in GDP cause corresponding changes in the number of people eligible for payment.
C) are not well correlated with changes in GDP in part because the discretionary power to enact changes in fiscal policy is diluted across too many congressional committees.
D) vary directly with tax revenues and therefore play no role in stabilization policy.
E) none of the above.
Correct Answer:
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