True or False: Transfer payments behave in the same way as tax revenues in the course of a business cycle. They automatically increase when tax revenues increase and decrease when tax revenues decrease.

Question

True false question.
True
False

Answer 1

False.

Transfer payments do not behave in the same way as tax revenues during a business cycle. Transfer payments, such as unemployment benefits or welfare assistance, typically increase during economic downturns when individuals may be more in need of support and decrease during economic upswings. In contrast, tax revenues generally increase with economic growth and decrease during recessions. Thus, the relationship between transfer payments and tax revenues is different in the context of a business cycle.