If the federal budget is initially balanced and government expenditures remain constant, then a
Decrease in GDP will _________ tax revenues and create a budget _________.

Name: If the federal budget is initially balanced and government expenditures remain constant, then a Decrease in GDP will _________ tax revenues and create a budget _________.
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Question

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A decrease in GDP will decrease tax revenues (since people and firms are earning less and therefore paying less in taxes), leading to a budget deficit.

If the Federal Budget Is Initially Balanced and Government Expenditures