Question

Tax increases and government spending cuts by state governments during recessions often reduce the expansionary impact of fiscal policy by the Federal government.

true or false

Answer 1

False. Tax increases and government spending cuts by state governments during recessions often reduce the expansionary impact of fiscal policy by the Federal government.

Step-by-step explanation:

False. . When state governments raise taxes or cut spending during a recession, it can offset the expansionary measures taken by the Federal government. This can happen because when state governments reduce spending, it leads to layoffs or reduced wages for state employees, which can have a negative impact on the overall economy. Additionally, when state governments increase taxes, it can reduce consumer spending and aggregate demand, further dampening the expansionary impact of fiscal policy.