If an economy goes into an expansion, then the government's:
A)outlays (e.g.transfer payments) will automatically fall and receipts (e.g.tax revenue) will automatically rise
B)outlays will automatically rise and receipts will automatically fall
C)outlays and receipts will automatically rise
D)outlays and receipts will automatically fall

Question

Quizplus · Accepted Answer

When an economy goes into an expansion, there is a natural increase in economic activity, which leads to higher levels of employment and income. As a result, people pay more taxes (higher receipts), and the government has to spend less on transfer payments such as unemployment benefits (lower outlays). Therefore, option A is the best choice as it states that outlays will fall and receipts will rise automatically.

If an Economy Goes into an Expansion, Then the Government's