The correct answer is:
increases and tax revenues decrease.
When the nation's total income rises, automatic stabilizers such as government transfer programs (e.g., unemployment benefits, welfare) typically decrease because fewer people need assistance. However, tax revenues generally increase because individuals and businesses are earning more and paying higher taxes. Therefore, in this context, we focus specifically on the government's response through transfer spending and tax revenue changes.
So, based on this understanding, the answer would be the opposite of the statement in the given options. However, if we're just focusing on transfer payments, during rising income, transfer payments generally decrease, and tax revenues typically increase.
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