A decrease in net taxes during a recession increases aggregate demand and helps the economy return to its potential output level.

Question

Quizplus · Accepted Answer

When net taxes decrease during a recession, consumers and firms have more disposable income, which can lead to an increase in consumption and investment spending, respectively. This, in turn, can increase aggregate demand and help the economy recover from a recession by increasing production and employment levels.

A Decrease in Net Taxes During a Recession Increases Aggregate