Fiscal Policy Analysis Indicates That Large Tax Increases During a Severe

Multiple Choice

Fiscal policy analysis indicates that large tax increases during a severe recession will result in

A) an increase in the incentive to earn and the maintenance of a balanced federal budget.
B) higher tax revenues and an expansion in government spending.
C) smaller budget deficits, which will speed an economic recovery.
D) a reduction in aggregate demand and a worsening of the recession.