Recessions have at times contributed to the rise in the public debt due to:
A) lower tax revenues as a result of the fall in GDP.
B) higher real interest rates.
C) higher international value of the dollar.
D) higher national saving.

Question

Quizplus · Accepted Answer

During recessions, economic activity slows down, leading to lower income and profits. This results in lower tax revenues for the government, as taxes are often levied on income and corporate profits. With less revenue coming in, if government spending does not decrease correspondingly, public debt can increase.

Recessions Have at Times Contributed to the Rise in the Public