When real Gross Domestic Product (GDP) falls, which of the following will automatically occur?

Question

Quizplus · Accepted Answer

When real GDP falls, it typically indicates that the economy is producing less and people are earning less. Therefore, income tax revenues are likely to decrease because people are making and spending less money. This would make option D incorrect. Additionally, there is no automatic correlation between real GDP and tax rates, so option A is also incorrect. Finally, a decrease in real GDP often leads to higher unemployment, which means that the government may need to spend more on unemployment compensation, making option C incorrect.

When Real Gross Domestic Product (GDP) Falls, Which of the Following