What automatically happens to tax receipts when GDP declines?

Multiple choice question.

There is not enough information to determine.

They stay the same.

They rise.

They decline.

1 answer

When GDP declines, tax receipts generally decline as well. This is because a decrease in GDP typically leads to lower income levels, reduced business profits, and decreased economic activity, which in turn results in lower tax collections from income, sales, and corporate taxes.

So, the correct answer is: They decline.