why might requiring the federal government to balance its budget each year limit its ability to respond to an economic downturn? it would require the government to increase spending to match increased tax revenues, pushing up interest rates and crowding out private spending. compel the government to cut spending to offset lost tax revenues, which decline during recessions. prevent the government from employing an expansionary fiscal policy, since increased government spending would have to be offset by increased taxes. force the fed to pursue an expansionary monetary policy, which would cause inflation, undermining economic growth.