Question

As the economy declines into recession, the collection of personal income tax revenues automatically falls. this phenomenon best illustrates how a progressive income-tax system

Answer 1

This phenomenon best illustrates how a progressive income-tax system serves as an automatic stabilizer for the economy.

What is an automatic stabilizer?

Automatic stabilizers are stabilizers that adjust the economy automatically without the intervention of external agents . Examples include progressive tax and transfer payments. A progressive tax is a tax structure where those who earn higher income are taxed more and those that earn less pay less amount of tax.

In an expansion, progressive tax increases the tax paid and this reduces disposable income. In a recession, tax paid is reduced and this increases disposable income

Here are the options:

increases crowding out in the economy

decreases real interest rates in the economy

offsets the timing problem for fiscal policy

Serves as an automatic stabiler for the economy

To learn more about taxes, please check: brainly.com/question/25311567

#SPJ1