7. Automatic, or built-in, stabilizers Which of the following are examples of automatic stabilizers? Check all that apply. In 2001, partly in response to a recession, the government enacted lower income tax rates and increased tax exemptions for married couples. As corporate profits rise during an economic expansion, corporations enter higher income tax brackets and need to pay more taxes on their profits. In response to the 1981-82 recession, the Canadian government passed a law that lowered personal income tax rates. As people earn higher incomes during an expansion, the progressive tax system requires them to pay higher average tax rates.

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Fiscal Policy and Money Market

Fiscal policy is one of the important tools that is used by the government to control inflation or aggregate demand in the economy. Under this policy, there are two rules which are used by the government, one is the expenditure of the government and the other is the taxation or income of the government which it collects from the public.