Asked by Anthony Espino on Jul 04, 2024
Verified
Which of the following would require reducing government expenditures and increasing tax rates during a recession?
A) An annually balanced budget policy
B) A countercyclical fiscal policy
C) A cyclically balanced budget policy
D) A policy employing built-in stability
Cyclically Balanced Budget
A cyclically balanced budget is a fiscal policy approach where government budgets are planned to balance over the economic cycle, allowing for surpluses in boom years and deficits in recession years.
Government Expenditures
The total amount spent by the government for its various services, projects, and functions within a specified period.
- Gain insight into how taxes and government expenditures contribute to fiscal policy.
Verified Answer
YG
Yakshi GuptaJul 05, 2024
Final Answer :
A
Explanation :
An annually balanced budget policy requires that government expenditures match revenues each fiscal year, regardless of the economic situation. Therefore, during a recession when revenues decline, reducing expenditures and increasing tax rates would be necessary to balance the budget.
Learning Objectives
- Gain insight into how taxes and government expenditures contribute to fiscal policy.