An Increased Federal Budget Deficit Resulting from a Recession Can

Multiple Choice

An increased federal budget deficit resulting from a recession can actually help stabilize an economy, because corporate profits tend to fall in a recession which, in turn, results in ________ corporate taxes and ________.

A) higher; more tax revenue for the government
B) higher; larger profits for businesses
C) lower; fewer spending cuts for businesses
D) lower; increases in the price level