An annually balanced budget _____
A) is the surest path to economic stability.
B) is mandated by the U.S. Constitution.
C) dampens cyclical swings by decreasing government spending during expansions and increasing it during recessions.
D) accentuates cyclical swings by increasing government spending during expansions and reducing it during recessions.
E) is a goal that has only been achieved twice in the past 5 years.

Question

Quizplus · Accepted Answer

An annually balanced budget, by requiring government spending to match revenues each year, can accentuate cyclical swings. This is because during economic expansions, when tax revenues are higher, it may lead to increased government spending, and during recessions, when tax revenues are lower, it may necessitate cuts in government spending. This can exacerbate the natural economic cycle rather than smoothing it out.

An Annually Balanced Budget _____