What automatically happens to tax receipts when GDP declines?

Multiple choice question.

They stay the same.

They rise.

There is not enough information to determine.

They decline.

1 answer

When GDP declines, tax receipts typically decline as well. This is because lower GDP often correlates with reduced income, lower profits for businesses, and decreased consumption, all of which can lead to lower tax revenues. Therefore, the correct answer is:

They decline.