Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 34 - Part XII - The Influence of Monetary and Fiscal Policy on Aggregate Demand - Questions for Review - Page 767: 5

Answer

One example on an automatic stabilizer is the tax system.

Work Step by Step

The tax system has this effect since the tax system is tied to the economy. As incomes increase, the government increases tax revenue. However, if there is a recession and incomes decrease, the tax revenue falls.
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