Which of the following statements is true?
A)Federal budget deficits became progressively smaller during the 1990s and turned into a surplus by 1998.
B)Federal spending declined relative to GDP,while federal revenues rose relative to GDP during the 1980s.
C)Functional finance says that policy makers should be concerned less with the economy's potential output and more with balancing the budget annually.
D)A disadvantage of functional finance is that it increases the level of unemployment during recessions.
E)A disadvantage of annual financed budget is that it dampens swings in the business cycle without increasing the national debt.

Question

Quizplus · Accepted Answer

The other statements are either partially or entirely false. Option B implies that federal spending decreased during the 1980s, but in reality, it doubled. Option C is incorrect as functional finance advocates for policymakers to focus on achieving full employment rather than a balanced budget. Option D is false as functional finance aims to reduce unemployment during recessions. Option E is inaccurate as annual budget financing does not necessarily dampen swings in the business cycle, but it can reduce the national debt.

Which of the Following Statements Is True