Why Does the Federal Debt Tend to Increase During Periods

question 88

Multiple Choice

Why does the federal debt tend to increase during periods of recession?

• A) Economic activity decreases,which decreases revenues and increases outlays.
• B) Economic activity decreases,which decreases revenues and decreases outlays.
• C) Economic activity increases,which increases revenues and increases outlays.
• D) Economic activity increases,which increases revenues and decreases outlays.
• E) Economic activity increases,which decreases revenues and increases outlays.

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Definitions:

Economic Activity

Actions that involve the production, distribution, and consumption of goods and services within an economy.

Resource Allocation

The process of assigning available resources to specific uses chosen among many possible and competing alternatives.

Price Controls

Government-imposed limits on the prices that can be charged for goods and services in the market to control inflation or ensure affordability.

Equilibrium Price

The price at which the quantity of goods supplied is equal to the quantity of goods demanded.