GDP Growth Increases Tax Revenues

Steps:

• GDP measures total economic output; a sustained increase signals expanding production and income.
• Higher output leads to more wages, profits, and transactions in the economy.
• Tax systems levy income, corporate, and sales taxes on these activities.
• Thus, government tax collections rise automatically with economic expansion.

Why C is correct:

• Tax revenues increase because GDP growth expands the tax base, as defined by fiscal policy where revenues scale with economic activity (e.g., progressive tax formulas tie collections to income levels).

Why the others are wrong:

• A: Higher GDP raises per capita income, improving living standards.
• B: Increased revenues typically boost budget surplus or reduce deficits.
• D: Economic growth from higher GDP reduces unemployment via more job creation.

Final answer: C