State and local governments are limited in their ability to respond to recessions because of:

Question

Quizplus · Accepted Answer

State and local governments are required by law or their constitutions to balance their budgets, which means that they cannot spend more money than they receive in revenue. This limits their ability to respond to recessions because they cannot increase their spending without finding ways to increase revenue, such as raising taxes or cutting spending in other areas. This can be challenging during a recession when revenue may decline and demand for government services may increase.

State and Local Governments Are Limited in Their Ability to Respond