Question

1) Give a thorough explanation (no less than a paragraph at least) on, what the government should do with its spending and taxes during a recession? Why?

Answer 1

If the economy gets into recession then many people get to lose their jobs with which the overall production levels of the country decreases by a great extent. If this happens then and the inflow of revenue to the government with the decrease in production level actually decrease and if the spending remain same then the budget deficit will get to increase by a great extent on the whole. In order to compensate this the government tries to reduce the spending with which it items to reduce the overall deficit levels all in all. The amount of revenue gets to decrease at the production level of every form and this leads to lower revenue in the form of taxes for the government as a result of which the taxes also get to reduce and in order to compensate this the government tries to increase the levels of tax to meet the demand and reduce depression all in all.