In general,appropriate fiscal policy would involve a budget

Question

Quizplus · Accepted Answer

During a recession, the government should increase spending and/or decrease taxes to stimulate economic activity and create jobs, even if it means running a budget deficit. During periods of full employment, the government should aim for a budget surplus to prevent inflation from occurring. A balanced budget policy regardless of the economic climate (option B) may not be appropriate as it may hinder economic growth during a recession. A surplus at all times (option C) may not be feasible or necessary as it may restrict economic activity. Completely eliminating the national debt in a single year (option D) is unrealistic and may not be desirable as some level of government borrowing is necessary for investment and spending on public goods. The full-employment budget surplus is an estimation of the budget surplus or deficit that would exist if the economy were operating at full employment. However, achieving this through fiscal policy alone may not be feasible (option E).

In General,appropriate Fiscal Policy Would Involve a Budget