Taxes would need to go up while spending would need to go down in order to maintain a budget deficit during a downturn, which would further weaken aggregate demand and prolong the downturn.
How Do Taxes Work? Taxes are compulsory payments made by a government organization, whether regional, regional, or federal, to people or businesses. Tax revenues are used to fund a variety of government initiatives, such as Medicare and Medicaid as well as public infrastructure and services like roads and schools.
All involuntary levies, including estate taxes, capital gains taxes, and income taxes, are referred to as "taxation." Although the term "taxation" can apply to both an act and a word, it is most commonly used to refer to the ensuing income.
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