With no change in fiscal policy, the budget
A)will run a surplus during a recession and a deficit during a boom.
B)deficit will rise during a recession and fall during a boom.
C)deficit will fall during a recession and rise during a boom.
D)will remain unchanged by adverse economic conditions.

Question

Quizplus · Accepted Answer

During a recession, government revenues tend to decrease due to lower tax incomes as people earn less and spend less, while government spending on welfare and unemployment benefits tends to increase, leading to a higher budget deficit. Conversely, during a boom, revenues increase and spending on benefits decreases, leading to a lower deficit.

With No Change in Fiscal Policy, the Budget