True or False : When the economy declines, the government will increase taxes to boost the economy.
History · High School · Sun Jan 24 2021
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False. Generally, when an economy is in decline, governments tend to decrease taxes, not increase them, to boost the economy. The rationale behind this is that by reducing taxes, consumers and businesses have more disposable income to spend, invest, and save, which can stimulate economic activity. This approach aligns with Keynesian economic theory, which suggests that in times of economic downturn, government interventions such as tax cuts and increased public spending can help to kick-start economic growth.