Question

Assume that laws have been passed that require the federal government to run a balanced budget. During a recession, the government will want to implement _____________________, but may be unable to do so because such a policy would ____________________________.A. contractionary fiscal policy; lead to a budget stalemateB. discretionary fiscal policy; lead to a budget surplusC. contractionary fiscal policy; lead to a budget deficitD. expansionary fiscal policy; lead to a budget deficit

Answer 1

D. expansionary fiscal policy; lead to a budget deficit

Answer 2

Assume that laws have been passed that require the federal government to run a balanced budget.

During a recession, the government will want to implement expansionary fiscal policy but may be unable to do so because such a policy would lead to a budget deficit. The correct answer is option D.

What is an expansionary fiscal policy?

Tax reductions, transfer payments, refunds, and greater public investment on initiatives like infrastructure upgrades are all examples of expansionary fiscal policy.

For instance, it might boost discretionary government expenditure, injecting additional cash into the economy via government contracts.

What is a budget deficit?

The gap between all income and expenses on the government's capital and revenue accounts is known as the budgetary deficit. The total of the capital account and revenue account deficits is the budgetary deficit.

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