The government's budget surplus in Macroland has risen consistently over the past five years. Two government policy makers disagree as to why this has happened. One argues that a rising budget surplus indicates a growing economy; the other argues that it shows that the government is using contractionary fiscal policy. Can you determine which policy maker is correct? If not, why not?
The government's budget surplus in Macroland has risen consistently over the past five years. Two government policy makers disagree as to why this has happened. One argues that a rising budget surplus indicates a growing economy; the other argues that it shows that the government is using contractionary fiscal policy. Can you determine which policy maker is correct? If not, why not?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
The government's budget surplus in Macroland has
risen consistently over the past five years. Two
government policy makers disagree as to why this has
happened. One argues that a rising budget surplus
indicates a growing economy; the other argues that it
shows that the government is using contractionary
fiscal policy. Can you determine which policy maker is
correct? If not, why not?
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