Question

If the federal government wants to encourage businesses and consumers to spend more money, it wo

A)
increase the tax rate.
B)
decrease the tax rate.
C)
increase the reserve requirement.
Eliminate
D)
decrease government spending on goods and services.
Fearing a recession the government decide

Answer 1

B) decrease the tax rate.

Step-by-step explanation:

Decreasing taxes results in individuals and businesses paying lower taxes to the government. Reducing taxes increases the amount of disposable income available to individuals and firms. Therefore, a decrease in taxes will have the same effects as an increase in income. Households and firms will have more money available for spending.

Decreasing taxes is one way the government may use to encourage increased spending. On the other hand, an increase in taxes results in lower disposable income for people and firms. A decrease in government spending results in fewer jobs available, which reduces incomes and consumer spending.