1. An example of an automatic stabilizer is
A. a temporary tax rebate.
B. the progressive income tax.Student Response
C. cost of living adjustments to social security payments.
2. Which of the following represent expansionary fiscal policy?
A. an increase in average individual income tax rates
B. an increase in marginal individual income tax rates
C.a cut in corporate income tax rates
for 1 i think it's all?
1. To determine which option is an example of an automatic stabilizer, we need to understand what automatic stabilizers are. Automatic stabilizers refer to government policies or measures that are designed to stabilize the economy during economic fluctuations without requiring explicit action from policymakers. These measures automatically kick in during times of economic downturn or expansion, helping to stabilize the economy.
Option B, the progressive income tax, is an example of an automatic stabilizer. The progressive income tax system means that people with higher incomes pay a higher percentage of their income in taxes. This means that during economic expansions, people's incomes increase, resulting in higher tax revenues for the government. Conversely, during economic downturns, people's incomes decrease, leading to lower tax revenues. The progressive income tax system helps to stabilize the economy by automatically adjusting the tax burden based on individuals' income levels and overall economic conditions.
Option A, a temporary tax rebate, does not qualify as an automatic stabilizer because it requires explicit action from policymakers. It is a discretionary fiscal policy measure that is implemented during specific economic conditions or as a response to a specific economic event.
Option C, cost of living adjustments to social security payments, also qualifies as an automatic stabilizer. Social security payments typically include adjustments that are based on changes in the cost of living index or inflation rate. These adjustments ensure that social security benefits keep pace with the rising cost of living, thus providing a stabilizing effect on individuals' income levels during economic fluctuations.
Therefore, the correct answer is B. The progressive income tax system is an example of an automatic stabilizer.
2. Expansionary fiscal policy refers to government policies or measures that aim to stimulate economic growth and increase aggregate demand during times of economic downturn or recession. To determine which option represents expansionary fiscal policy, we need to understand how each measure affects the economy.
Option A, an increase in average individual income tax rates, would generally be considered a contractionary fiscal policy measure. By increasing tax rates, individuals have less disposable income, which can reduce consumer spending and aggregate demand. This measure is typically used during periods of economic growth to control inflation or reduce budget deficits.
Option B, an increase in marginal individual income tax rates, also has a similar effect as Option A and would generally be considered a contractionary fiscal policy measure.
Option C, a cut in corporate income tax rates, is an example of expansionary fiscal policy. By reducing corporate tax rates, businesses have more money available for investment, expansion, and job creation. This measure can stimulate economic growth, increase business activity, and boost aggregate demand.
Therefore, the correct answer is C. A cut in corporate income tax rates represents expansionary fiscal policy.