Budget deficits tend to grow during recessions because?

Question

Budget deficits tend to grow during recessions because

a. real GDP growth is positive, which increases tax receipts in relation to government expenditures.

b. real GDP growth is negative, which reduces tax receipts in relation to government expenditures.

c. real GDP growth is zero, which causes neither tax receipts nor government expenditures to grow.

d. real GDP growth is negative, which reduces transfer payments in relation to tax receipts.

e. real GDP growth is positive, which reduces both tax receipts and transfer payments.

Which of the following statements is not true?

a. Government deficits can have no effect on international trade.

b. Government deficits can lower the level of output in the economy.

c. Higher interest rates can depress investment.

d. Lower investment means fewer capital goods in the future. e. Increased government borrowing raises interest rates.

Answer 1

1 - b

2 - b

Answer 2

Budget deficits tend to grow during recessions because

b. real GDP growth is negative, which reduces tax receipts in relation to government expenditures.

. Which of the following statements is not true?

b. Government deficits can lower the level of output in the economy.