Assume that the government is currently balancing the national budget so that outlays equal tax revenue.Then the economy starts into an expansion,and the government decides to decrease government spending by $50 billion.As a result:

Question

Quizplus · Accepted Answer

During an economic expansion, tax revenues typically increase due to higher incomes and profits. By decreasing government spending by $50 billion, the government is likely to create a surplus, as the increased tax revenue combined with reduced spending will exceed the initial balanced budget.

Assume That the Government Is Currently Balancing the National Budget