The Main Reason That the Deficit Grows in a Recession

question 6

Multiple Choice

The main reason that the deficit grows in a recession is that

• A) the government reacts quickly and adjusts taxes to compensate.
• B) monetary policy that targets interest rates causes the costs of borrowing to fall.
• C) the deficit causes the recession, and reducing the deficit cures the recession.
• D) many forms of taxes act as automatic stabilizers.

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Definitions:

Control Group

A group in an experiment that does not receive the treatment and is used as a benchmark to measure how the other tested groups do.

Caffeine

A stimulant commonly found in coffee, tea, chocolate, and some medications, affecting the central nervous system.

Reaction Time

The time it takes for an individual to respond to stimuli, reflecting the speed of processing information and executing a response.

Generalizing

The process of forming general concepts by abstracting common properties of instances.