Question #72

Taxation revenue will rise as the budget deficits rise because

• the higher net spending increases economic activity and more people become employed.
• the higher net spending ultimately has to be paid for even if in the short-run the government is not revenue-constrained.
• the higher net spending requires higher tax rates so that people will demand more currency.

Answer #706

Answer: the higher net spending increases economic activity and more people become employed.

Explanation

Please read The budget deficits will increase taxation! for more information or post a comment if you are unsure.