Over the course of the business cycle, what happens to government tax revenues in order to stabilize the economy?

Question

Multiple choice question.

They fluctuate in the opposite direction as the economy.

They rise or fall automatically.

They remain fixed unless deliberately changed set.

They always remain constant.

Answer 1

The correct answer is:

They rise or fall automatically.

This reflects the concept of automatic stabilizers in the economy, where government tax revenues change naturally in response to the economic cycle without the need for legislative action. For example, tax revenues typically rise during economic expansions and fall during recessions.