Government budget deficits tend toGroup of answer choicesincrease in recessionsincrease when there is an expansionary output gap.None of the others is correct.decrease in recessionsremain in balance irrespective of business cycles
Question
Government budget deficits tend toGroup of answer choicesincrease in recessionsincrease when there is an expansionary output gap.None of the others is correct.decrease in recessionsremain in balance irrespective of business cycles
Solution
The correct answer is: "increase in recessions."
Here's a step-by-step explanation:
-
A government budget deficit occurs when a government's expenditures exceed its revenues.
-
During a recession, economic activity slows down, leading to lower tax revenues for the government. This is because incomes and profits fall, reducing the amount of income and corporate taxes collected.
-
At the same time, government spending tends to increase during a recession. This is because the government often implements fiscal stimulus measures, such as increased spending on public works projects or increased transfer payments like unemployment benefits, to boost the economy.
-
As a result, the combination of lower revenues and higher expenditures leads to an increase in the government budget deficit during a recession.
-
Therefore, the correct answer is: "increase in recessions."
Similar Questions
Suppose the economy is currently in a boom and the government is running a structural budget deficit. This meansGroup of answer choicesthere is a cyclical budget balance of zerothere cannot be an actual budget surplusthere cannot be an actual budget deficitthere is a cyclical budget surplus
which of the following measures of meeting deficit in budget, leads to an increase inmoney supply in the economy:(a). Disinvestment (b). Loan from world Bank (C).Deficit financing (d).Allof these
To solve a recessionary gap, by using Fiscal Policy, the Federal government would decrease taxes and decrease government expenditure. Group of answer choicesTrueFalse
Suppose the economy is in a boom and the government is running a budget deficit. This implies the government is running a __________ and ___________ its net debt. structural deficit; increasing structural surplus; decreasing structural deficit; does not change structural surplus; increasing structural deficit; decreasing
Theoretically, to eliminate a recessionary gap, the Fed could ____________ the money supply, and to eliminate an inflationary gap, the Fed could _____________ the money supply.Group of answer choicesincrease; decreaseincrease; increasedecrease; increasedecrease; decreasenot change; not change
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.