In an expansion,federal tax receipts increase proportionally more than real GDP without the need for any government policy.This increase is an example of
A)discretionary monetary policy.
B)automatic monetary policy.
C)automatic fiscal policy.
D)discretionary fiscal policy.
E)the effect of deficit spending.

Question

Quizplus · Accepted Answer

Automatic fiscal policy refers to the changes in government spending and taxes that occur automatically without any deliberate government action. In this scenario, as real GDP increases, individuals and firms pay more in taxes and the government receives more tax revenue without any change in tax rates or other policies. This is an example of automatic fiscal policy, specifically the automatic increase in tax receipts that occurs as GDP grows.

In an Expansion,federal Tax Receipts Increase Proportionally More Than Real