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The more progressive the tax system …
the greater the economy’s built-in stability.
When GDP is down…(Non-Discretionary)
the tax burden on consumers is low, promoting consumption and increasing AD.
When GDP is up…(Non-Discretionary)
more tax burden on consumers, discouraging consumption and decreasing AD.
When GDP is down… (Non-Discretionary)
unemployment is higher and more benefits will be paid out. This helps to increase AD.
When GDP is up…(Non-Discretionary)
unemployment is low and fewer benefits will be paid out, decreasing AD.
