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Chapter 30: Q.41 (page 742)

In a booming economy, is the federal government more likely to run surpluses or deficits? What are the various factors at play?

Short Answer

Expert verified

The federal government would run a surplus amid a growing economy.

Step by step solution

01

Definition of a booming economy.

A trade surplus is shown by solid growth in major economic indices such like GDP throughout time.

02

Explanation of solution.

In a booming economy, the federal government is capable of going a surplus. The automatic stabilisers will modify the taxation and spending levels. Due to greater employment and income, the government will be able to receive more tax revenue, and spending will naturally fall.

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