Question

Assume that the economy is in a recession and there is a budget deficit. A strict balanced-budget rule that would require the Federal government to balance its budget during a recession would be

Answer 1

Answer:

Contractionary and worsen the effects of the recession

Explanation:

Given that during the period of the recession of a given economy, there is a decrease in revenue and inversely, there is an increase in expenditures, this situation will consequently lead to a deficit. Therefore, for a Federal government to balance the budget, it will have to increase additional revenue and at the same time reduces expenditures.

However, in this case, this would be contractionary and worsen the effects of the recession