The policy of keeping tax rates stable as government spending fluctuates is known as ________.

Question

Quizplus · Accepted Answer

Tax smoothing is a policy of keeping tax rates stable even when government spending fluctuates. This helps to reduce changes in private consumption and investment that might result from changes in government spending, and to avoid sudden shocks to the economy. Ricardian equivalence is a theory that suggests that the timing of tax changes does not affect people's consumption or saving behavior, while crowding-out refers to the negative effect that government borrowing can have on private investment. "A tax smoothie" is not a recognized economic term.

The Policy of Keeping Tax Rates Stable as Government Spending