Rising GDP would automatically cause a) tax revenues to fall. b) government spending to rise. c) an increasing goverment budget deficit. d) an increasing government budget surplus.

Rising GDP would automatically cause

1. a) tax revenues to fall.
2. b) government spending to rise.
3. c) an increasing goverment budget deficit.
4. d) an increasing government budget surplus.

Answer

• d) an increasing government budget surplus.

Explanation:

A rise in GDP causes an increase in taxes and revenue while government expenditure decrease hence an increase in government budget surplus. The economy has high rate of capital investment, and high aggregate demand which raises interest and tax revenue. On the other hand, the government expenditure is less compared to the total revenue received hence a budget surplus.