Question

Which of the following situations could cause a budget deficit for the federal government?

A) The federal government issues more treasury bonds than treasury notes.
B) Government spending decreases.
C) There is a recession.
D) The federal government raises taxes.

Answer 1

Answer: The answer is letter C.

Answer 2

The answer is letter C. There is a recession. It is a temporary economic decline when trade and business activities are lessened which leads to the GDP of the country to reduce in numbers. If the decline would last for at least 6 months, this will cause a major impact on the real GDP,