Suppose legislation required the government's budget to be balanced annually.With regard to real GDP,this rule would be

Question

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Requiring the government's budget to be balanced annually would be destabilizing because it would make fiscal policy pro-cyclical, meaning that the government would be cutting spending or raising taxes during a recession when the economy is already weak, making the recession even worse. This is not a desirable outcome, as it would exacerbate economic instability rather than promote stability.

Suppose Legislation Required the Government's Budget to Be Balanced Annually