Suppose the economy has fallen into a severe recession. From a macroeconomic theory point of view which of the following is an appropriate government policy? reduce government spending balance the Federal budget increase government spending on goods and services increase taxes on capital gains

Suppose the economy has fallen into a severe recession. From a macroeconomic theory point of view which of the following is an appropriate government policy? reduce government spending balance the Federal budget increase government spending on goods and services increase taxes on capital gains

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter15: Fiscal Policy

Section: Chapter Questions

Problem 1SQ

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Question

100%

Suppose the economy has fallen into a severe recession. From a macroeconomic theory point of view which of the following is an appropriate government policy?

reduce government spending

balance the Federal budget

increase government spending on goods and services

increase taxes on capital gains

Definition Definition Tax imposed by the government on the "gain" or increase in the value of an asset at the time of its sale by the owner. Capital gain is computed based on the purchase price and sale price of the asset. If the sale price of the asset is more than the purchase price, there is a gain on the sale of asset. A tax is imposed on such gain in accordance with the applicable tax rates at the time of sale.

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