When the Consumption Function Is Expressed as C = Ca

question 225

Multiple Choice

When the consumption function is expressed as C = Ca + b (1- t) y, income taxes act as an automatic stabilizer because:

• A) when the economy experiences a large increase in GDP, the government's tax collection increases without the approval from Congress, increasing disposable income and consumption.
• B) when the economy experiences a large increase in GDP, the government's tax collection decreases without government action, decreasing disposable income and consumption.
• C) when the economy experiences a large increase in GDP, the government's tax collection increases without government action, decreasing disposable income and consumption.
• D) when the economy experiences a large increase in GDP, the government's tax collection increases without government action, increasing disposable income and consumption.

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Definitions:

Economic Impact

The effect of an event, policy, or market condition on the economy of a region or country, which may involve changes in job creation, GDP, and overall economic growth.

Influenza Epidemic

A widespread outbreak of the influenza virus that affects a large population across multiple areas or countries, often leading to significant illness and mortality rates.

Civil War

A conflict between citizens of the same country. In the United States, it refers specifically to the war fought from 1861 to 1865 over issues including states' rights and slavery.

Deaths

The end of life in biological organisms, marking the permanent cessation of vital functions and processes.