Changes in the budget balance:
A)can be the result of fluctuations in the economy.
B)can cause fluctuations in the economy.
C)can be both the result of and the cause of changes in the economy.
D)are always bad idea.

Question

Quizplus · Accepted Answer

Changes in the budget balance can be both the result of and the cause of changes in the economy. For example, if the economy is experiencing a recession, tax revenues may decrease and government spending on unemployment benefits may increase, leading to a larger budget deficit. On the other hand, a large budget deficit can also lead to crowding out of private investment and higher interest rates, which can slow down economic growth. Thus, changes in the budget balance can both be a symptom of economic fluctuations and contribute to further fluctuations in the economy. Option D is not relevant as it is an opinion and not a factual statement.

Changes in the Budget Balance