Built-in stability is exemplified by the fact that with a progressive tax system, net tax revenues decrease when GDP decreases.Topic: Fiscal Policy and the AD-AS Model

Question

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In a progressive tax system, tax rates increase with income, so when GDP decreases, individuals and businesses earn less, leading to lower tax revenues, which stabilizes the economy by leaving more money in the hands of consumers and businesses.

Built-In Stability Is Exemplified by the Fact That with a Progressive