📚 Learning Guide
Government Budget Deficits
medium

When a government experiences a recession without any discretionary policy action, it is likely to move into a ________, as expenditures typically exceed revenues due to rising transfer payments and declining tax revenues.

Master this concept with our detailed explanation and step-by-step learning approach

Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

surplus

B

balance

C

deficit

D

surplus budget

Understanding the Answer

Let's break down why this is correct

Answer

When a government goes through a recession, it usually means that the economy is not doing well, and people are earning less money. Because of this, the government collects less in taxes, which are based on people's income and business profits. At the same time, more people may need help from the government, such as unemployment benefits or food assistance, leading to higher spending. When the government spends more money than it earns, this situation creates a budget deficit. For example, if a government typically collects $100 million in taxes but spends $120 million during a recession, it ends up with a $20 million deficit.

Detailed Explanation

A deficit happens when a government spends more money than it earns. Other options are incorrect because A surplus means the government has more money than it spends; A balanced budget means spending equals income.

Key Concepts

Government Budget Deficits
Fiscal Policy
Economic Recession
Topic

Government Budget Deficits

Difficulty

medium level question

Cognitive Level

understand

Ready to Master More Topics?

Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.