The economy is in a recession, the recessionary gap is large, and there is a budget deficit. If a discretionary increase in government expenditure occurs, the structural deficit ________ or the structural surplus ________.

Question

Quizplus · Accepted Answer

A discretionary increase in government expenditure during a recession would lead to an increase in the structural deficit, as the government is spending more than it is collecting in revenue. This would also lead to a decrease in the structural surplus, if one existed.

The Economy Is in a Recession, the Recessionary Gap Is