A decrease in real GDP would affect the Australian 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 income and profits, which in turn reduces tax revenues. At the same time, the government may increase spending to stimulate the economy, thus raising government expenditures.

A Decrease in Real GDP Would Affect the Australian Economy