The business cycle and the budget balance are unrelated.

Question

Quizplus · Accepted Answer

The business cycle and the budget balance are related because the state of the economy can impact government revenue and spending, which affects the budget balance. In a recession, government revenue may decrease due to lower tax revenue and increased spending on programs such as unemployment benefits, leading to a larger budget deficit. In contrast, during economic expansion, tax revenue may increase and government spending on social programs may decrease, leading to a smaller budget deficit or even a budget surplus.

The Business Cycle and the Budget Balance Are Unrelated