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Chapter 30: Q.49 (page 743)

Do you agree or disagree with this statement: 鈥淚t is in the best interest of our economy for Congress and the President to run a balanced budget each year.鈥� Explain your answer

Short Answer

Expert verified

As a supporter of the mandate balanced budget, I agree with the statement.

Step by step solution

01

Step 1; Concept introduction.

In economics, a nation's leadership raises revenue through imposing direct and indirect taxes on income, goods, and services. It, on either hand, invests and buys things with the money it earns. The gap between the income statements and budgeted expenses determines whether a budget is in surplus or deficit.

02

Explanation of solution.

Agree.

Although not everyone agrees, I feel the advantages of having a balanced budgeting outweigh the disadvantages. Because the U.S. Constitution contains no budget requirement, the federal government is not obligated to have one, and Congress seldom approves one. Many proposed changes to an U.S. Constitution mandate a balanced budget, but none has been implemented.

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Most popular questions from this chapter

What is the difference between expansionary fiscal policy and contractionary fiscal policy?

True or False:

a. Federal spending has grown substantially in recent decades.

b. By world standards, the U.S. government controls a relatively large share of the U.S. economy.

c. A majority of the federal government's revenue Is collected through personal income taxes.

d. Education spending is slightly larger at the federal level than at the state and local level.

e. State and local government spending has not risen much in recent decades.

f. Defense spending is higher now than ever.

g. The share of the economy going to federal taxes has increased substantially over time.

h. Foreign aid is a large portion, although less than half, of federal spending.

i. Federal deficits have been very large for the last two decades.

j. The accumulated federal debt as a share of GDP is near an all-time high.

What is the benefit of having state and local taxes on income instead of collecting all such taxes at the federal level?

Specify whether the expansionary or contractionary fiscal policy would seem to be most appropriate in response to each of the situations below and sketch a diagram using aggregate demand and aggregate supply curves to illustrate your answer:

a. A recession.

b. A stock market collapse that hurts consumer and business confidence.

c. The extremely rapid growth of exports.

d. Rising inflation.

e. A rise in the natural rate of unemployment.

f. A rise in oil prices

What are some of the arguments for and against a requirement that the federal government budget be balanced every year?
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