When faced with a recessionary gap, the government can increase taxes and cut spending to close it.

Question

Quizplus · Accepted Answer

When faced with a recessionary gap, the government typically uses expansionary fiscal policies, such as reducing taxes and increasing government spending, to close the gap and stimulate the economy. Increasing taxes and cutting spending would be contractionary fiscal policies, which would likely worsen the recessionary gap.

When Faced with a Recessionary Gap, the Government Can Increase