Learning Path
Question & Answer1
Understand Question2
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Explore TopicChoose the Best Answer
A
It will move into a deficit due to falling revenues and rising transfer payments.
B
It will move into a surplus because of increased government spending.
C
It will remain balanced as revenues and expenditures will offset each other.
D
It will depend entirely on the political climate of the government.
Understanding the Answer
Let's break down why this is correct
Answer
During a recession, a government's budget is likely to be affected because tax revenues usually decrease while spending often increases. When the economy slows down, people earn less money, which means they pay less in taxes. At the same time, the government may need to spend more on programs like unemployment benefits to help those who are struggling. For example, if a city experiences high unemployment, it may see a drop in income tax revenue but an increase in welfare payments. This combination can lead to a larger budget deficit, meaning the government spends more than it earns.
Detailed Explanation
During a recession, people earn less money. Other options are incorrect because Some might think that more spending helps the budget; It's a common belief that income and spending balance each other out.
Key Concepts
Government Budget Deficit
Economic Recession
Fiscal Policy
Topic
Government Budget Deficits
Difficulty
easy level question
Cognitive Level
understand
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