If the Government Increases Its Spending During Recession to Assist

question 41

Multiple Choice

If the government increases its spending during recession to assist the economy, the funds for such expenditures must come from some source.Which of the following sources would be the most expansionary?

• A)additional taxes on personal incomes
• B)creating new money
• C)borrowing from the public
• D)additional taxes upon corporate profits

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Definitions:

Proportional Tax

A tax system where the tax rate remains constant regardless of the amount subject to tax.

Federal Income Tax

A tax levied by the federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.

Medicare Taxes

Taxes withheld from income to fund Medicare, the United States' federal healthcare program for individuals aged 65 and older and some younger people with disabilities.

Marginal Tax Rates

The rate of tax applied to your last dollar of income, representing what percentage of any additional earned income will be taken as tax.