Question

The actual and standardized budgets will be equal when: 
A. The rate of inflation is zero
B. The economy is at full employment
C. The balanced-budget multiplier is 1
D. Taxes have no effect on fiscal policy

Answer 1

Answer:

The correct answer to the following question is B) the economy is at full employment.

Explanation:

Standardized budget which is also know as full employment budget , is used to measure the federal budget deficit or surplus , with the given tax rates and government spending. Here the assumption made is that the economy has full employment, and this is one of the major difference between standardized and actual budget . Also standardized budget would reflect any type of adjustment that has to be made in the actual budget. So therefore the only way that actual budget and standardized budget are equal is when they both have full employment present in the economy.