Suppose the actual budget deficit remains unchanged when the economy falls into a recession. This is an indication that
A) monetary policy was not used during the recession.
B) fiscal policy was not used during the recession.
C) monetary policy was used during the recession.
D) fiscal policy was used during the recession.

Question

Quizplus · Accepted Answer

A recession typically reduces tax revenue and increases government spending on programs like unemployment benefits, which would normally result in an increase in the budget deficit. However, if the deficit remains unchanged, it suggests that the government did not take any fiscal policy actions such as increasing government spending or cutting taxes to boost economic growth.

Suppose the Actual Budget Deficit Remains Unchanged When the Economy