Government Spending

Question 1

What happens to the budget balance when the economy moves into recession

Answer 1

The budget balance moves into deficit because tax receipts fall and government spending rises

Question 2

Why do tax receipts fall in a recession

Answer 2

Income decreases, profits decrease, spending decreases

Question 3

Why does government spending rise during a recession

Answer 3

Increase in employment, increase in benefit claims

Question 4

What would happen to the budget balance if there was a boom in an economy

Answer 4

Increase in income, profits and spending

Decrease in unemployment and benefit claims

Question 5

Government spending represents an _____________ into the circular flow of income

Answer 5

Injection