Question

A fall in real GDP that results in a decrease in personal income tax receipts is an example of​ ______.

a. structural spending
b. discretionary fiscal policy
c. automatic fiscal policy
d. a recession

Answer 1

c. automatic fiscal policy

Step-by-step explanation:

Automatic fiscal policy are policies triggered automatically due to the state of the economy which causes either government spending or taxes to increase or decrease.

For example, if the economy is undergoing a downturn and real GDP falls, the amount paid as taxes would fall.

If the economy is booming and the real GDP rises, the amount paid as taxes would rise.

These are examples of automatic fiscal policies.

Discretionary fiscal policy is when the government purposely increases or reduces either its spending or taxes in response to the economic conditions.

I hope my answer helps you.