A negative demand shock increases consumer and investment spending and tends to increase the budget deficit.

Name: A negative demand shock increases consumer and investment spending and tends to increase the budget deficit.
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Question

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A negative demand shock decreases consumer and investment spending, which leads to a decrease in tax revenue and an increase in government spending on safety nets such as unemployment benefits. This can cause an increase in the budget deficit.

A Negative Demand Shock Increases Consumer and Investment Spending and Tends