If a budget is cyclically balanced,the government should run a surplus when the economy experiences an expansionary gap.

Question

Quizplus · Accepted Answer

If a budget is cyclically balanced, it means that over the course of an economic cycle, the government will collect enough revenue to cover its expenditures. Therefore, there is no need for the government to run a surplus during an expansionary gap, as the budget is already balanced over the cycle. However, it may choose to use the surplus to pay down debt or save for future downturns.

If a Budget Is Cyclically Balanced,the Government Should Run a Surplus