What is the automatic effect on the government's budget balance when the economy experiences growth?

Multiple choice question for Fiscal And Monetary Policy. Select an option, then review the explanation below.

Explanation

When the economy expands, the government's budget position tends to deteriorate automatically. This occurs because increased economic activity can lead to higher expenditures or other fiscal pressures that negatively impact the budget balance.

Practice related questions from the same subject.

1.Why might a government impose taxes on certain goods or services?
2.Which statement accurately describes a regressive tax system?
3.If the marginal tax rate is 40% and an individual's income rises from Rs 10,000 to Rs 12,000, what will be the total tax amount paid?
4.Which of the following actions aligns with a reflationary (expansionary) fiscal policy?
5.What does over-funding mean in the context of the State Bank of Pakistan's actions?

What is the automatic effect on the government's budget balance when the economy experiences growth?

Explanation

More Fiscal And Monetary Policy MCQs