deficit and debt reduction (contractionary)

Question 1

budget surplus, and types

Answer 1

-tax revenue>spending
-structutral at full ecmployment
-cyclical: in a boom
-debt: stock of gov debt over time

Question 2

benefits of budget surplus

Answer 2

-confidence in finances
-flexibility with fiscal policy
-less crowding out
-lower inflation

Question 3

cons of budget surplus

Answer 3

-demand-side shocks: lower growth higher unemployment
-micro and macro impacts: healthcare- longer wait times. less productivity
-long run bad
-risk of income inequality

Question 4

evaluation

Answer 4

-need: already stable
-debt/gdp rising: GDP may not rise so much
-policy used
-stage of cycle