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

Question

Quizplus · Accepted Answer

When real GDP falls, it generally indicates a decrease in economic activity and a contraction in the economy. As a result, people and businesses tend to earn less, leading to a decrease in income tax revenues. Therefore, choice B, a decrease in income tax revenues, is the most likely outcome. The other choices do not necessarily follow from a decrease in GDP.

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