Which of the following is an example of a built-in stabilizer?

Multiple choice question.

The U.S tax system

Fiscal policy

The required reserve ratio

Monetary policy

1 answer

The correct answer is The U.S. tax system.

Built-in stabilizers are mechanisms within the economy that automatically counterbalance economic fluctuations without the need for explicit government action. The U.S. tax system, as it is structured, reduces tax liabilities during economic downturns (when incomes fall) and increases tax liabilities during economic expansions (when incomes rise), making it a built-in stabilizer.