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?

a) The policy would likely help Doomsville recover faster.b) The policy would likely make Doomsville’s recession worse.c) The policy would likely have no effect on Doomsville’s economy.d) The policy would have an unknown effect on Doomsville’s economy.

Answer 1

Option "B" is the correct answer to the following answer.

Step-by-step explanation:

It is generally considered appropriate to use higher policies such as fiscal expansion or monetary expansion to control the recession.

By continuously increasing the tax rate, the level of disposable income will be reduced considerably due to which the overall consumption level of the economy will also be reduced drastically, as a result of which this policy will make the situation of Doomsvile even worse, so option b is The correct answer.