The provisions in state constitutions requiring them to balance their budgets mean that:
A)state governments often behave procyclically because lower revenues during recessions means lower state spending.
B)state government spending acts as an automatic stabilizer for the national economy.
C)state governments can follow a functional finance approach with greater consistency than the federal government, which has no such requirement.
D)state governments can only use monetary policy to affect their economies.

Question

Quizplus · Accepted Answer

State governments often have to reduce spending during economic downturns due to lower revenues and the requirement to balance their budgets, which can exacerbate economic fluctuations, making their fiscal policy procyclical.

The Provisions in State Constitutions Requiring Them to Balance Their