During a Recession, Rising Transfer Payments and Falling Tax Collections

Multiple Choice

During a recession, rising transfer payments and falling tax collections
I. help cushion households from the impact of the recession.
II. buffers the fall in real GDP (relative to a situation where transfer payments do not rise and
Tax revenues do not fall) .
III. tend to increase a budget deficit or reduce a budget surplus.

A) I only
B) I and II only
C) II and III only
D) I, II, and III