Suppose that, without any legislative action, personal income tax payments automatically fall and unemployment compensation payments automatically increase. Based on these changes in taxes and compensation payments, you would expect that the economy is:

Question

Quizplus · Accepted Answer

These changes are characteristic of automatic stabilizers in action, which are designed to mitigate the effects of an economic downturn. When personal income tax payments decrease and unemployment compensation payments increase without legislative action, it typically indicates that the economy is slowing down or slipping into a recession. These measures help to increase disposable income and stimulate demand, counteracting the negative effects of a recession.

Suppose That, Without Any Legislative Action, Personal Income Tax Payments