If There Is a Constitutional Requirement to Maintain a Balanced

question 29

Multiple Choice

If there is a constitutional requirement to maintain a balanced budget, then during a recession when tax revenues are shrinking, the government will have to implement

• A) contractionary fiscal policy.
• B) no change in fiscal policy.
• C) expansionary fiscal policy.
• D) countercyclical fiscal policy.

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Definitions:

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, indicating the profitability of a firm beyond normal profit levels.

Marginal Revenues

Represents the additional income generated from the sale of one more unit of a good or service.

Total Revenues

The gross revenue obtained from merchandise or service transactions before removing any operational expenses.

Total Revenue Curve

A graphical representation showing the relationship between the total revenue received by a firm and its quantity of output sold.