What Happens to Deficits During Recessions

question 148

Multiple Choice

What happens to deficits during recessions?

• A) They increase, because tax revenues decline while spending programs increase.
• B) They decrease, because tax revenues decline while spending programs decrease.
• C) They increase, because personal income and corporate profits increase, boosting tax revenue.
• D) They decrease because personal income and corporate profits increase, boosting tax revenue.
• E) They decrease during recessions and increase during expansions.

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Definitions:

Market

A venue or system where buyers and sellers interact to trade goods, services, or financial instruments, determining prices through supply and demand.

Inverse Demand Function

A mathematical model describing the relationship between the price of a good and the quantity demanded, typically showing how price can affect demand levels.

Monopolist

An individual or entity that is the sole supplier of a particular commodity or service, having significant control over its market.

Price Discrimination

The strategy of selling the same product or service at different prices to different customers, based on factors like willingness to pay, market segments, or purchase quantity.