The level of economic activity in a given year will cause the budget deficit to vary.

Question

Quizplus · Accepted Answer

Economic activity affects government revenue and spending, which in turn impacts the budget deficit. For example, during a recession, lower economic activity can decrease government revenue while increasing demands for social welfare programs, leading to a larger budget deficit. Alternatively, during a period of economic growth, higher revenues from taxes and other sources can decrease the budget deficit.

The Level of Economic Activity in a Given Year Will