Transfer payments and tax revenue are examples of: Select one: a. automatic stabilizers. b. market transactions....

Transfer payments and tax revenue are examples of:

Select one:

a. automatic stabilizers.

b. market transactions.

c. saving measures.

d. discretionary measures.

Expert Solution

Option a is the correct answer.

Transfer payments and tax revenue are the examples of automatic stabilizers. Automatic stabilizers are explained as the features of transfer systems and tax revenue which temper the economy as it overheats and also refreshes and stimulates as it slumps without any kind of direct participation of policy makers. fluctuations in economy is offset by those automatic stabilizers.

Taxes are automatic stabilizers in downturns it increases disposable income and also decreases the same during booms. Ina recession unemployment increases. As a result government expenditure also rises accordingly. And in booms it seems to be decreases. So as booms causes increase in output and recession reasons to the decrease , expenditure is observed to rise as a share of income in the period of recessions and decrease as share of income in time of booms. thus transfer payments also an example of automatic stabilizers

Rahul Sunny answered 2 years ago

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