Increases in the federal budget deﬁcit from 2007 to 2009 were caused
A) exclusively by the loss of tax revenue due to recession.
B) exclusively by expansionary ﬁscal policy, as shown through growth in the cyclically adjusted deﬁcit.
C) primarily by a combination of recession and expansionary ﬁscal policy.
D) primarily by increased outlays to a rapidly growing number of Social Security recipients.

Question

Quizplus · Accepted Answer

The increases in the federal budget deficit from 2007 to 2009 were primarily caused by a combination of recession and expansionary fiscal policy. The recession led to a loss of tax revenue, while expansionary fiscal policy, such as increased government spending and tax cuts, also contributed to the deficit. While there may have been some increase in outlays to Social Security recipients, this was not the primary cause of the deficit increases during this time period.

Increases in the Federal Budget Deﬁcit from 2007 to 2009