Question

There is a _______ relationship between real GDP and tax revenues, which partially explains deficit spending during a recession.

positive
contradictory
inconsequential
negative

Answer 1

Answer: positive

Explanation:

The real gross domestic product refers to the value of the output in an economy which has been adjusted for price changes.

There's a positive relationship between the real GDP and tax revenues. This can be used to explain deficit spending during a recession. When there's recession, there'll be a reduction in the output and consumption in the economy. At this point, there'll be a reduction in GDP.