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In: Economics

Assume the government has a balanced budget and that the economy is experiencing a recession, the...

Assume the government has a balanced budget and that the economy is experiencing a recession, the tax revenue collected by the government is likely to ________, which would lead to a ________.

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Expert Solution

When economy is experiencing a recession then it means that aggregate demand is decreases so if the tax revenue collected by the government decrease then more money in the market and so more investment and also people have money so that purchasing power increases and due to this demand is created and production increases and economy will be stable.

But if the tax revenue decreases then government budget would be decreases.

So tax revenue decreases and would lead to a decrease a government budget.

Rahul Sunny answered 2 years ago
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