The cyclically balanced budget is important because it:
A)is an estimate of the amount of expansionary fiscal policy necessary to close an inflationary gap.
B)is an estimate of the amount of contractionary fiscal policy necessary to close a recessionary gap.
C)indicates the amount of tax revenue that will be available for implicit liabilities.
D)helps to determine whether the government's taxing and spending policies are sustainable in the long run.

Question

Quizplus · Accepted Answer

The cyclically balanced budget helps determine the sustainability of government taxing and spending policies in the long run. It takes into account fluctuations in the business cycle and aims for a balance over time rather than in any given year. Options A and B are related to closing gaps in the economy rather than budget balancing, and option C refers to tax revenue specifically for implicit liabilities, which is not directly related to budget balancing.

The Cyclically Balanced Budget Is Important Because It