A disadvantage of having an annually balanced budget is that government spending would have to
A)increase in recessions and decrease during expansions
B)decline during a recession to offset the increase in tax revenues
C)rise during a recession to match the increase in tax revenues
D)rise during an expansion to offset the decline in tax revenues
E)decline in a recession to match the decrease in tax revenues

Question

Quizplus · Accepted Answer

An annually balanced budget requires government spending to match tax revenues, which means that spending would have to decline during a recession to match the decrease in tax revenues. This could worsen the recession, as lower government spending could result in a reduction in economic activity and further job losses. Therefore, it is a disadvantage of annually balanced budgets.

A Disadvantage of Having an Annually Balanced Budget Is That