An example of automatic fiscal policy is
A)an interest rate cut,initiated by an act of Congress.
B)an increase in the quantity of money.
C)a tax cut,initiated by an act of Congress.
D)a decrease in tax revenues,triggered by the state of the economy.
E)any change in the interest rate,regardless of its cause.

Question

Quizplus · Accepted Answer

A decrease in tax revenues triggered by the state of the economy is an example of automatic fiscal policy. This means that the government's fiscal policy automatically adjusts in response to changes in the economy. For example, during a recession, tax revenues naturally decrease as people make less income and therefore pay less in taxes. This decrease in revenue can act as a buffer for the economy, as it can increase disposable income and provide a boost to overall demand.

An Example of Automatic Fiscal Policy Is