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 ____________________________.

Answer 1

Answer:

Expansionary fiscal policy; lead to a budget deficit

Explanation:

A balanced budget is when the income of the government equals government's spending

A recession is when the GDP of a country for two consecutive quarters is negative. It is a period of slowdown in economic activities.

If there is a recession, the government would want to increase money supply by conducting an expansionary fiscal policy but would be prevented from doing so because of the balanced budget rule as an expansionary fiscal policy would lead to a budget deficit.

A budget deficit is when government spending exceeds income