As the economy contracts, tax revenues:
A. fall and transfer payments rise, causing the economy to contract by less than it would in the absence of automatic stabilizers.
B. fall and transfer payments fall, causing the economy to contract by more than it would in the absence of automatic stabilizers.
C. rise and transfer payments rise, causing the economy to contract by more than it would in the absence of automatic stabilizers.
D. rise and transfer payments fall, causing the economy to contract by less than it would in the absence of automatic stabilizers.
Answer: A
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The closer the substitutes for a good, the
A) more elastic is the demand for the good. B) less elastic is the demand for the good. C) smaller the degree of substitutability between the goods. D) larger the proportion of income that is spent on the good.
The full-employment level of output is called:
A) aggregate demand. B) aggregate supply. C) potential output. D) none of the above.