Which of the following statements best illustrates a cyclically balanced-budget fiscal policy?
A)The budget should be balanced each budget year.
B)The budget should always balance.
C)The life of the business cycle is the appropriate time period to attempt to balance the budget.
D)Fiscal policy really has nothing to do with the budget.
E)A balanced budget is the only appropriate fiscal policy.

Question

Quizplus · Accepted Answer

A cyclically balanced-budget fiscal policy aims to balance the budget over the business cycle rather than every budget year or always. This recognizes that government spending and revenues fluctuate with the economy, and attempts to balance the budget over this natural cycle can help stabilize the economy. Options A, B, D, and E either call for always balancing the budget or suggest that fiscal policy is not related to the budget.

Which of the Following Statements Best Illustrates a Cyclically Balanced-Budget