Budget deficits almost always:
A) decrease with inflation and increase with deflation.
B) increase when unemployment rises and decrease when unemployment falls.
C) decrease when unemployment rises and increase when unemployment falls.
D) increase when the aggregate price level rises and decrease when the aggregate price level falls.

Question

Quizplus · Accepted Answer

Budget deficits tend to increase when unemployment rises because government spending on unemployment benefits and other social services typically increases, while tax revenues decrease due to lower income and consumption. Conversely, deficits tend to decrease when unemployment falls as tax revenues increase and spending on social services decreases.

Budget Deficits Almost Always