Question

Taxes and​ needs-tested spending work as automatic fiscal policy to dampen the business cycle because taxes​ ______ during an​ expansion, and​ needs-tested spending​ ______ during a recession.

Answer 1

The answers to the blanks provided above are DECREASES and INCREASES, respectively.  This is based on the concept of what a business cycle is. What happens during recession is that they try to restore the economy by expansion, and therefore, through this, the government increases their spending and cutting taxes as well.