An increased federal budget deficit resulting from a recession can actually help stabilize an economy through transfer payments because an increased budget deficit will ________ transfer payments and thereby ________ the income of some households.

Question

Quizplus · Accepted Answer

An increased federal budget deficit during a recession often leads to higher transfer payments, such as unemployment benefits, which directly increase the income of households receiving them. This process is part of automatic fiscal stabilizers that help to mitigate the economic downturn.

An Increased Federal Budget Deficit Resulting from a Recession Can