If the economy suffers a recession for reasons unrelated to fiscal policy, the deficit should rise and
A)inflation should fall.
B)interest rates should fall.
C)real GDP should fall.
D)all of the above are correct.

Question

Quizplus · Accepted Answer

During a recession, the deficit typically rises due to lower tax revenues and higher government spending on social services. Inflation usually falls because of decreased demand for goods and services. Interest rates may fall as central banks attempt to stimulate the economy. Real GDP falls as a direct consequence of the recession, reflecting a decrease in economic output.

If the Economy Suffers a Recession for Reasons Unrelated to Fiscal