A law requiring the federal budget to be balanced each year would likely:
A)make business cycles more severe.
B)make business cycles less severe.
C)not affect the severity of business cycles.
D)increase the effectiveness of automatic stabilizers.

Question

Quizplus · Accepted Answer

If there is a law that requires the federal budget to be balanced each year, it will lead to a reduction in government spending during an economic contraction, which could make business cycles more severe. This is because government spending acts as an automatic stabilizer during economic downturns. Therefore, reducing government spending can cause a more severe downturn.

A Law Requiring the Federal Budget to Be Balanced Each