{"id":90595,"date":"2025-06-01T10:31:41","date_gmt":"2025-06-01T10:31:41","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=90595"},"modified":"2025-06-01T10:31:41","modified_gmt":"2025-06-01T10:31:41","slug":"which-one-of-the-following-functions-as-an-automatic-stabilizer-in-the","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/which-one-of-the-following-functions-as-an-automatic-stabilizer-in-the\/","title":{"rendered":"Which one of the following functions as an automatic stabilizer in the"},"content":{"rendered":"

Which one of the following functions as an automatic stabilizer in the context of fiscal and monetary policies of an economy?<\/p>\n

[amp_mcq option1=”Personal income tax” option2=”Reverse repo rate of bank” option3=”Open market operation” option4=”Bond price” correct=”option1″]<\/p>\n

\n
\n
This question was previously asked in<\/div>\n
UPSC CAPF – 2021<\/div>\n<\/div>\n
Download PDF<\/a>Attempt Online<\/a><\/div>\n<\/div>\n
\nPersonal income tax functions as an automatic stabilizer because tax revenue automatically increases during economic booms (as incomes rise) and decreases during recessions (as incomes fall), helping to moderate the business cycle without requiring explicit policy changes.
\n<\/section>\n
\nAutomatic stabilizers are government programs or policies that counteract the business cycle automatically. During an economic downturn, they stimulate the economy by increasing spending or reducing taxes (e.g., unemployment benefits, progressive income tax). During an upturn, they restrain the economy by decreasing spending or increasing taxes.
\n<\/section>\n
\nReverse repo rate and open market operations are tools of monetary policy used by the central bank, requiring deliberate action (discretionary policy), not automatic adjustment. Bond prices are market outcomes, not policy tools acting as stabilizers. Other examples of automatic stabilizers include corporate profit taxes and welfare benefits.
\n<\/section>\n","protected":false},"excerpt":{"rendered":"

Which one of the following functions as an automatic stabilizer in the context of fiscal and monetary policies of an economy? [amp_mcq option1=”Personal income tax” option2=”Reverse repo rate of bank” option3=”Open market operation” option4=”Bond price” correct=”option1″] This question was previously asked in UPSC CAPF – 2021 Download PDFAttempt Online Personal income tax functions as an … <\/p>\n

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