If a government always balances its budget:
A) the economy can never fall into a recession.
B) raising taxes has no net effect on total spending.
C) economic growth is spurred by showing businesses that budgets can be balanced.
D) the effect of an increase in government spending on aggregate expenditures is weakened.

Question

Quizplus · Accepted Answer

Balancing the budget means any increase in government spending must be offset by an increase in taxes or a decrease in other spending, which can weaken the impact on aggregate expenditures.

If a Government Always Balances Its Budget