A progressive income tax system is particularly effective as an automatic stabilizer because
A)It reduces demand when income falls.
B)In a booming economy,taxpayers move into higher tax brackets,which restrains their spending.
C)During a recession,it causes the budget deficit to fall.
D)It falls more heavily on taxpayers with high MPCs,which stimulates aggregate demanD.Progressive income taxes are particularly effective stabilizers because they siphon off increasing proportions of purchasing power when incomes are rising and decreasing proportions when aggregate demand and output are falling.

Question

Quizplus · Accepted Answer

As the economy booms, taxpayers move into higher tax brackets, which restrain their spending. This helps to prevent excessive inflation and potential bubbles in the economy. This makes progressive income tax system an effective automatic stabilizer.

A Progressive Income Tax System Is Particularly Effective as an Automatic