An increase in taxes or a decrease in spending during an economic expansion can
A) increase the budget deficit but pay off some of the government debt.
B) work to decrease the budget deficit and pay off some of the government debt.
C) work to decrease the budget deficit but will not pay off any of the government debt.
D) increase the budget deficit and increase the size of the government debt.
E) work to decrease the budget deficit and increase the government debt.

Question

Quizplus · Accepted Answer

During an economic expansion, tax revenues naturally increase and unemployment falls, which leads to a decrease in spending on welfare programs like unemployment benefits. Therefore, an increase in taxes or decrease in spending can help to reduce the budget deficit and potentially pay off some government debt.

An Increase in Taxes or a Decrease in Spending During