Cyclical Causes Of Budget Deficit

Question 1

Main cyclical reason

Answer 1

Recession- T and GS changes that occur within the economic cycle

Question 2

What happens to T and GS in a recession

Answer 2

Revenues from taxes are reduced and the government spends more on benefits

Question 3

Difference between MEDCs and LEDCs

Answer 3

MEDCs allow the automatic stabilisers to work as when the economy recovers, the cyclical component will diminish and the government may run a budget surplus