Question

The country of Doomsville is currently in a recession. The government of Doomsville, in an effort to maintain its tax revenues in a time when incomes are falling, decides to increase the tax rate. Would this policy help or hurt the recession?

This policy would have an unknown effect on Doomsville’s economy.

This policy would likely make Doomsville’s recession worse.

This policy would likely have no effect on Doomsville’s economy.

This policy would likely help Doomsville recover faster.

Answer 1

Answer: This policy would likely make Doomsville’s recession worse

As changes in taxation are among the main tools of economic policy, their effects on the economy have been exhaustively studied