Answer:
D. cause tax revenues to decrease when GDP decreases and to increase when GDP increases.
Explanation:
Gross Domestic Products (GDP) is a measure of the total market value of all finished goods and services made within a country during a specific period.
Simply stated, GDP is a measure of the total income of all individuals in an economy and the total expenses incurred on the economy's output of goods and services in a particular country.
Automatic stabilizers can be defined as changes in government spending or taxes and consequently, raises aggregate demand without the intervention of policy makers when an economy falls into recession.
In Economics, it is also referred to as built-in stability and this means that with given tax rates and expenditures policies such as fiscal and monetary policy; an increase in domestic income will reduce a budget deficit or produce a budget surplus, while a decline in income will result in a deficit or a lower budget surplus.
Basically, an automatic stabilizer is an economic system or policies that automatically shore up or strengthen the Gross Domestic Products (GDP) without specific government intervention for sustenance or creation of stability in the economic cycle of a country.
Hence, automatic stabilizers can cause tax revenues to decrease when GDP decreases and to increase when GDP increases.
