The government budget deficit tends to decrease during the expansion phase of a business cycle because tax revenues ________ and government transfer payments ________.

Question

Quizplus · Accepted Answer

During the expansion phase of a business cycle, economic activity increases, leading to higher incomes and thus higher tax revenues for the government. At the same time, the need for government transfer payments (such as unemployment benefits) decreases because more people are employed.

The Government Budget Deficit Tends to Decrease During the Expansion