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Built-in stability means that:_________.

a. with given tax rates and expenditures policies, a rise 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.

b. an annually balanced budget will offset the procyclical tendencies created by state and local finance and thereby stabilize the economy.

c. congress will automatically change the tax structure and expenditure programs to correct upswings and downswings in business activity.

d. government expenditures and tax receipts automatically balance over the business cycle, though they may be out of balance in any single year.

Respuesta :

Lanuel

Answer:

a. with given tax rates and expenditures policies, a rise 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.

Explanation:

Built-in stability, also known as automatic stabilizer means that with given tax rates and expenditures policies, a rise 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.

Simply stated, Built-in stability are economic system or policies which are involuntarily triggered without precise government intervention in order to create stability in the economic cycle of a country. They are systems that automatically shore up or strengthen the Gross Domestic Products (GDP) without the intervention from the government.

For example, taxation usually decreases during a recession because individuals and businesses make less, which leads to unemployment and an increase in social security funds.

Also, it is necessary to note that built-in stability only offsets economic activity fluctuations partially.

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