Which of the Following Is an Example of an Automatic

Multiple Choice

Which of the following is an example of an automatic stabilizer?

A) Congress legislates lower tax rates to increase consumption and investment.
B) Tax rates are increased during a recession to maintain a balanced budget.
C) A regressive income tax system reduces tax revenues (as a share of income) as income expands.
D) Revenues from the corporate income tax increase sharply during a business boom but decline substantially during a recession, even though no new tax legislation has been enacted.