Question

Here are several important philosophies regarding budget balances. One way in which they differ is in terms of the time span over which the budget should be balanced. Another difference among budget philosophies involves whether the budget balance is as important as other economic goals. Which of the following budget philosophies advocates allowing deficits during recessions that are offset by surpluses during expansions? a.Functional finance b.Cyclically balanced budget c.Annually balanced budget

Answer 1

Cyclically balanced budget philosophies advocates allowing deficits during recessions that are offset by surpluses during expansions.

b.Cyclically balanced budget

Explanation:

This is called a spending philosophy which provides stabilization in the business cycle. Under this philosophy, during the recession period, deficit spending is allowed and also a surplus in an inflationary period.

It is the budget that does not require to be balanced year to year due to so many fluctuations. But it is balanced in an economic cycle. Under this government runs the surplus in the period of boom and running of deficit in the period of lean.

Sometimes under this, the cyclic deficit is incurred due to ups and downs in the business cycle. This is the most rigid method of balancing the budget in the business cycle. The practice of this philosophy is more dependent on good times matching along with the bad times.