Actions by the Federal government that decrease the progressivity of the tax system:
A) Decrease the amount of government spending
B) Increase the effect of automatic stabilizers
C) Decrease the effect of automatic stabilizers
D) Increase the multiplier effect

Question

Quizplus · Accepted Answer

The effect of automatic stabilizers is to increase the progressivity of the tax system by providing more support to those with lower incomes during economic downturns. Decreasing the effect of automatic stabilizers, such as unemployment insurance or food stamps, makes the tax system less progressive. Decreasing government spending (A) could have an effect on the progressivity of the tax system, but it depends on where the spending cuts are made. Increasing the effect of automatic stabilizers (B) would increase the progressivity, so it does not decrease it. Increasing the multiplier effect (D) would not have a direct impact on the progressivity of the tax system.

Actions by the Federal Government That Decrease the Progressivity of the Tax