Assume that the government is currently balancing the national budget so that outlays equal tax revenue.Then the economy slips into recession,and the government decides to increase government spending by $50 billion.The government must pay for this by borrowing; it must sell $50 billion worth of Treasury bonds.As a result,the federal budget will

Question

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When the government increases spending by $50 billion, it will have to borrow money by selling Treasury bonds. This increases the national debt, which is added to the budget deficit. Therefore, the federal budget will be in deficit by at least $50 billion.

Assume That the Government Is Currently Balancing the National Budget