A constitutional amendment is passed that requires the government to have an annually balanced budget in the sense that changes in spending should be matched by equivalent changes in taxes. Should the government desire to increase GDP by $25 billion and meet the provisions of the law it:
A) Cannot possibly reach its objective without breaking the law
B) Could increase spending by $25 billion and reduce taxes by $25 billion
C) Could increase spending by $25 billion and increase taxes by $25 billion
D) Could increase spending by $30 billion and increase taxes by $25 billion

Question

Quizplus · Accepted Answer

Since the government is required to have an annually balanced budget, any increase in spending must be matched by an equivalent increase in taxes. Therefore, the government could increase spending by $25 billion and increase taxes by the same amount to balance the budget and meet the provisions of the law. Option A is incorrect since breaking the law is not an option. Option B is incorrect because reducing taxes by $25 billion would result in a deficit. Option D is incorrect because increasing spending by $30 billion would result in a higher deficit.

A Constitutional Amendment Is Passed That Requires the Government to Have