Question

During the recession of $2007-2009,$ the U.S. federal government's tax collections fell from about 2.6 trillion dollars down to about 2.1 trillion dollars while GDP declined by about 4 percent. Does the U.S. tax system appear to have builtin stabilizers? LO31.2 a. Yes. b. No.

Name: Problem 3, Chapter 31: Economics: Principles, Problems, and Policies
Uploaded: 2020-07-25T11:34:30-08:00
Duration: 1 min 44 s
Channel: Alejandro Ruiz
Description: During the recession of 2007-2009, the U.S. federal government's tax collections fell from about 2.6 trillion dollars down to about 2.1 trillion dollars while GDP declined by about 4 percent. Does the U.S. tax system appear to have builtin stabilizers? LO31.2 a. Yes. b. No.

   During the recession of $2007-2009,$ the U.S. federal government's tax collections fell from about 2.6 trillion dollars  down to about 2.1 trillion dollars while GDP declined by about
4 percent. Does the U.S. tax system appear to have builtin stabilizers? LO31.2
a. Yes.
b. No.

Economics: Principles, Problems, and Policies

Campbell R.… 20th Edition

Chapter 31, Problem 3

Instant Answer

Solved by Expert Alejandro Ruiz

07/25/2020

Step 1

A built-in stabilizer is a feature of the tax system that automatically adjusts tax revenues and government spending in response to economic fluctuations, without requiring any new legislation or policy changes. Show more…

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During the recession of $2007-2009,$ the U.S. federal government's tax collections fell from about 2.6 trillion dollars down to about 2.1 trillion dollars while GDP declined by about 4 percent. Does the U.S. tax system appear to have builtin stabilizers? LO31.2 a. Yes. b. No.

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Key Concepts

Automatic Stabilizers

Automatic stabilizers are features of the fiscal system that automatically adjust to changes in economic conditions without direct intervention by policymakers. Examples include progressive income taxes and unemployment benefits that increase during economic downturns to cushion the negative impact on aggregate demand, thus stabilizing the economy.

Fiscal Policy

Fiscal policy refers to the use of government spending and taxation to influence the economy. In the context of economic fluctuations, built-in features of the tax system, such as automatic stabilizers, can help smooth out the business cycle by reducing the severity of recessions or overheating during booms.

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