Question

During the recession of 2007−2009, the U.S. federal government’s tax collections fell from about $2.6 trillion down to about $2.1 trillion while GDP declined by about 4 percent. Does the U.S. tax system appear to have built-in stabilizers.

A. Yes
B. No

Answer 1

Answer: A. Yes

Explanation: The US tax system has built-in stabilizers which help when the economy is down.

Built-in stabilizers are economy policies of government which are triggered automatically to stabilize the economy when it experiencing a downward movement or an unexpected growth in an excessive way without the explicit intervention of the government. An example of this is unemployment insurance.