During a recession, the government finds that its tax revenues have significantly decreased while its welfare and unemployment payments have increased. Given this scenario, what is the most likely immediate impact on the government budget, and what fiscal policy response might be necessary to address this situation?

During a recession, the government usually collects less money from taxes because people and businesses earn less. At the same time, the government spends more on welfare and unemployment benefits to help those who are struggling. This situation creates a budget deficit, meaning the government is spending more than it is earning. To address this issue, the government may need to use fiscal policy, which could include increasing taxes or cutting spending in other areas. For example, if the government raises taxes slightly on higher earners, it could help balance the budget while still providing necessary support for those in need.