An economic expansion tends to cause the federal budget deficit to ________ because tax revenues ________ and government spending on transfer payments ________.

Question

Quizplus · Accepted Answer

During an economic expansion, tax revenues typically increase due to higher incomes and corporate profits, while government spending on transfer payments (such as unemployment benefits) tends to decrease because more people are employed. This combination can lead to a decrease in the federal budget deficit.

An Economic Expansion Tends to Cause the Federal Budget Deficit