Many economists oppose a constitutional amendment that would require a balanced budget for the federal government because it would probably make the business cycle more volatile.

Question

​Many economists oppose a constitutional amendment that would require a balanced budget for the federal government because it would probably make the business cycle more volatile.

BlackTom AI · Accepted Answer

Automatic stabilizers and the ability to run countercyclical deficits prevent large swings in output; a strict balanced-budget requirement removes that flexibility and therefore tends to make the business cycle more volatile — True.

Relevant concepts:
- Automatic stabilizers (unemployment insurance, progressive taxes) raise the deficit in recessions and lower it in booms, cushioning demand.
- Countercyclical fiscal policy (deliberate deficits in downturns, surpluses in upturns) smooths output and employment.
- A constitutional balanced-budget amendment (BBA) that requires annual balanced books eliminates or sharply constrains the government’s ability to run cyclical deficits.

Step-by-step reasoning:
1. In a recession, incomes and tax receipts fall while safety-net payments rise; without policy changes this automatically creates a larger deficit that supports aggregate demand.
2. A strict BBA would force the government to immediately cut spending or raise taxes to restore balance. That is procyclical: it reduces aggregate demand when demand is already weak.
3. In a boom the reverse holds: a BBA would force surpluses (via higher taxes or spending restraint), which subtracts demand and amplifies the upswing’s contractionary pressure on inflation and growth.
4. Amplifying the negative swings in recessions and the contractionary pulls in booms increases volatility of GDP and employment over the business cycle.

Illustrative (conceptual) numeric logic: suppose an automatic stabilizer increases the deficit by $100B in a downturn, supporting aggregate demand by that amount. A BBA would instead require a $100B fiscal consolidation, removing that support and deepening the downturn by roughly the same order of magnitude, depending on multipliers.

Why True is correct: by preventing deficit financing timed to the cycle, a strict BBA converts stabilizing fiscal actions into destabilizing ones, increasing volatility. Why False is incorrect: claiming a BBA would not increase volatility ignores the loss of automatic and discretionary countercyclical fiscal tools.

Conclusion: The correct answer is True, matching the provided answer.

Many economists oppose a constitutional amendment that would require a balanced budget for the federal government because it would probably make the business cycle more volatile. 单项选择题

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Which of the following is not a strength of using fiscal policy as a tool to achieve macroeconomic goals?

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Automatic fiscal stabilisers:

Permanent tax cuts have a larger impact on consumption spending than temporary ones.

Which type of fiscal policy action is most appropriate during an economic boom to prevent overheating and inflationary pressures?

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​Many economists oppose a constitutional amendment that would require a balanced budget for the federal government because it would probably make the business cycle more volatile. 单项选择题

类似问题

Which of the following is not a strength of using fiscal policy as a tool to achieve macroeconomic goals?

Which of the following is the least likely effect of an increase in government spending?

Which of the following is the least likely effect of an increase in government spending?

Automatic fiscal stabilisers:

Permanent tax cuts have a larger impact on consumption spending than temporary ones.

Which type of fiscal policy action is most appropriate during an economic boom to prevent overheating and inflationary pressures?

Keynesians government policies include investments in capital. These include

Effective Keynesian government policies to promote long term economic growth might include:

更多留学生实用工具

希望你的学习变得更简单

Many economists oppose a constitutional amendment that would require a balanced budget for the federal government because it would probably make the business cycle more volatile. 单项选择题