Although a balanced budget may be appropriate under one monetary policy, a deficit or surplus may be appropriate under a different monetary policy.

Question

Quizplus · Accepted Answer

A balanced budget may be appropriate when the monetary policy is focused on price stability and inflation control. However, in a recessionary environment, a deficit may be necessary to stimulate the economy through government spending. Likewise, during a period of economic expansion, a surplus may be appropriate to prevent overheating and inflation. So, the appropriateness of a deficit or surplus depends on the monetary policy objectives and economic conditions.

Although a Balanced Budget May Be Appropriate Under One Monetary