Question

Based on the taxing and spending cycle, how will changing expenditures affect taxes collected by the government? Spending less will help lower prices, leading to an increase in tax revenue for the government. Spending less will reduce services, leading to a reduction in tax revenue for the government. Spending more will boost prices, leading to an increase in tax revenue for the government. Spending more will increase services, leading to a reduction in tax revenue for the government.

Answer 1

Answer

Spending more will increase services, leading to a reduction in tax revenue for the government.

Explanation

Increasing expenditure on services is a part of expansionary fiscal policy which is also usually followed by a reduction in taxes. This will also increase consumer spending but will tighten the government budget deficit as the government will have to increase it's borrowing.

Answer 2

Correct answer "Spending less will reduce services, leading to a reduction in tax revenue for the government. " or B.