A decrease in real GDP would affect the U.S. economy by:
A) cutting tax revenues and raising government expenditures.
B) cutting government expenditures and raising tax revenues.
C) raising both tax revenues and government expenditures.
D) cutting both government expenditures and tax revenues.

Question

Quizplus · Accepted Answer

A decrease in real GDP typically leads to lower tax revenues because individuals and businesses earn less and therefore pay less in taxes. At the same time, government expenditures often increase due to higher demand for unemployment benefits and other social services.

A Decrease in Real GDP Would Affect the U