Balancing the government's budget every year

Question

Quizplus · Accepted Answer

Balancing the government's budget every year makes it difficult to use fiscal policy to stabilize the economy. This is because if the government is required to balance the budget, it cannot spend more during times of economic downturns to stimulate the economy through increased government spending. This is a key tool of Keynesian economics, which advocates for government intervention to manipulate aggregate demand to stabilize the economy. Therefore, choice D is the best answer. Option A is incorrect because not all debts have to be paid immediately or even be completely paid off; option B is incorrect because Keynesian economics focuses on the use of fiscal policies, particularly deficit spending to manage the economy; option C is incorrect because the government's budget is different from a family budget, with the former involving a much broader scope of spending and revenue collection; and option E is incorrect because balancing the budget is unlikely to result in simultaneous inflation and unemployment.

Balancing the Government's Budget Every Year