Under a balanced budget policy, a sharp rise in GDP will cause
A)no serious budget changes.
B)a tax cut or an increase in expenditures.
C)a tax increase or expenditure cut.
D)tax receipts to exceed government expenditures.

Question

Quizplus · Accepted Answer

Under a balanced budget policy, if there is a sharp rise in GDP, the government would have extra revenue from increased tax receipts. This extra revenue could either be used to increase government expenditures or cut taxes. Therefore, the best choice is B, a tax cut or an increase in expenditures.

Under a Balanced Budget Policy, a Sharp Rise in GDP