If the economy is to have significant built-in stability, then when real GDP increases, the tax revenues should
A)fall proportionately more than the change in GDP.
B)fall proportionately less than the change in GDP.
C)rise proportionately more than the change in GDP.
D)rise proportionately less than the change in GDP.

Question

Quizplus · Accepted Answer

Built-in stability in an economy implies that tax revenues should rise proportionately more than the change in GDP to help counteract inflationary pressures by reducing disposable income and thus dampening excessive economic growth.

If the Economy Is to Have Significant Built-In Stability, Then