Implementation of cyclically balanced government budgets

Question

Quizplus · Accepted Answer

Cyclically balanced government budgets require precise prediction of potential GDP to pinpoint the stages of the business cycle, which can be challenging. Option A is incorrect as cyclically balanced budgets aim to stabilize output gaps. Option C is incorrect as built-in fiscal stabilizers are still necessary. Option D is incorrect as frequent changes in political power can disrupt the implementation of cyclically balanced budgets. Option E may be true, but the statement does not indicate whether it is successfully practiced in other countries or not.

Implementation of Cyclically Balanced Government Budgets