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Unformatted text preview: rapidly.not to reduce the price level. A person wanting to preserve the size of government might favor a tax hike and would want to preserve government spending programs. Someone who thinks that the public sector is too large might favor cuts in government spending since this would reduce the size of government. 7. When the economy enters a recession, net tax revenue falls. Specifically, revenues from income and excise taxes decline as unemployment rises and consumer spending falls. At the same time, transfer payments to help the poor and/or unemployed rise. If tax revenue falls and the government is required to balance the budget, it will be forced to either cut spending or increase taxes both of which are contractionary policies likely to worsen the recession....
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This note was uploaded on 02/25/2011 for the course ECON 1 taught by Professor Young during the Fall '10 term at Edison State College.
- Fall '10