If government adhered strictly to an annually balanced budget,then the government's budget would:

Question

Quizplus · Accepted Answer

Adhering strictly to an annually balanced budget would mean that the government cannot run deficits during recessions, which can lead to decreased government spending and therefore decreased aggregate demand. This can cause the economy to become even more unstable during recessions. On the other hand, deficits during booms can help stabilize the economy by increasing government spending and aggregate demand. Therefore, adhering strictly to a balanced budget can tend to destabilize the economy.

If Government Adhered Strictly to an Annually Balanced Budget,then the Government's