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Purchases Made by Governments Over the Business Cycle

Question 12

Multiple Choice

Purchases made by governments over the business cycle


A) move procyclically with GDP as governments that collect more or less in taxes over the cycle spend more or less on goods and services.
B) move countercyclically with GDP as governments try to smooth out the cycle by spending more on goods and services in recession and less during booms.
C) are not very well correlated with changes in GDP because discretionary adjustments in purchasing arrangements take a long time to consummate and are almost never canceled.
D) are one of the major causes of business cycles as we now understand them.
E) none of the above.

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