During a recession, tax revenues ________ while government transfer payments ________, thereby mitigating part of the adverse effects of a recession and stabilizing the economy.

Question

Quizplus · Accepted Answer

During a recession, tax revenues tend to fall as individuals and businesses earn less income and pay less in taxes. However, government transfer payments, such as unemployment benefits, tend to increase as more people lose their jobs and rely on government assistance. Therefore, choice A is the correct answer. The increase in government transfer payments helps to offset some of the negative impacts of the recession by providing a safety net for those who have been negatively affected.

During a Recession, Tax Revenues ________ While Government Transfer Payments