Consider the diagram below which measures the budget balance, BB (i.e. taxes minus government expenditure) on the vertical axis and the level of income in the economy, Y, on the horizontal axis. BB 0 BB BB¹ Assuming the normal level of income is Y* and that the current fiscal policy is represented by the dashed line (BB¹) and the current level of income is Y¹, then the diagram suggests that O the segment B - C is a measure of the current structural budget balance. the segment Y* - B is a measure of the current cyclical budget balance O the segment A - C is an indicator of the current cyclical budget balance the segment A - Y¹ indicates a surplus budget and thus that there is currently a restrictive or contractionary fiscal stance

Consider the diagram below which measures the budget balance, BB (i.e. taxes minus government expenditure) on the vertical axis and the level of income in the economy, Y, on the horizontal axis. BB 0 BB BB¹ Assuming the normal level of income is Y* and that the current fiscal policy is represented by the dashed line (BB¹) and the current level of income is Y¹, then the diagram suggests that O the segment B - C is a measure of the current structural budget balance. the segment Y* - B is a measure of the current cyclical budget balance O the segment A - C is an indicator of the current cyclical budget balance the segment A - Y¹ indicates a surplus budget and thus that there is currently a restrictive or contractionary fiscal stance

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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