If the level of government expenditures is given, budget surpluses and deficits depend on tax revenues, which tend to vary directly with GDP.

Question

Quizplus · Accepted Answer

Tax revenues tend to vary directly with GDP, meaning that as the GDP increases, tax revenues also tend to increase. This can affect whether the government experiences a budget surplus or deficit, depending on whether tax revenues exceed or fall short of expenditures.

If the Level of Government Expenditures Is Given, Budget Surpluses