As the economy declines into recession, the collection of personal income tax revenues automatically falls.This phenomenon best illustrates how a progressive income-tax system
A)increases crowding out in the economy.
B)decreases real interest rates in the economy.
C)offsets the timing problem for fiscal policy.
D)serves as an automatic stabilizer for the economy.

Question

Quizplus · Accepted Answer

A progressive income-tax system serves as an automatic stabilizer because it naturally adjusts tax revenues in response to economic conditions, helping to moderate the effects of economic fluctuations without the need for explicit policy changes.

As the Economy Declines into Recession, the Collection of Personal