If the Economy Goes into a Recession,the Structural Budget Deficit

question 97

Multiple Choice

If the economy goes into a recession,the structural budget deficit is most likely to

• A)increase,because government expenditures and tax revenues will both rise.
• B)increase,because government expenditures will rise and tax revenues will decline.
• C)remain unchanged,although there will be a primary budget surplus.
• D)remain unchanged,unless government actively changes its fiscal policy.
• E)decrease,because government expenditures will decrease and tax revenues will rise.

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Definitions:

Expected Return-Beta Relationship

A concept in finance that describes the relationship between the expected return of an investment and its beta, indicating the investment's relative risk compared to the market.

Security Market Line

A line that represents the relationship between the expected return of an investment and its risk as measured by beta.

Underpriced Security

A financial security that is selling for a price believed to be below its true value or potential market price, presenting a buying opportunity.

Market Portfolio

A portfolio consisting of a mix of all available investments in the market, weighted by market value, which represents the entire stock market or a particular segment of it.