Due to automatic stabilizers, when the nation's total income rises, government transfer spending
A) increases and tax revenues decrease.
B) decreases and tax revenues increase.
C) and tax revenues decrease.
D) and tax revenues increase.

Question

Quizplus · Accepted Answer

Automatic stabilizers work to moderate the impact of economic fluctuations. When the nation's total income rises, government transfer spending (such as unemployment benefits) typically decreases because fewer people need financial assistance. At the same time, tax revenues increase because individuals and businesses earn more and thus pay more in taxes.

Due to Automatic Stabilizers, When the Nation's Total Income Rises