Chapter 13, Problem 10P

To determine

Concept Introduction:

Balanced Budget:

When the revenue of government from all the sources are equal to the expenditure of the government that is when there is neither budget surplus nor budget deficit then the budget of government is said as balanced budget.

Business Cycle:

Over a period of time, economy of any country faces fluctuations in its economic activities. These fluctuations or upswings and downswings are called as business cycles. These upswings and downswings are called as expansion and recession. At expansion phase, the economy tends to grow in the real terms whereas in recession, the economy tends to contract.

To explain:

Consequences of balanced-budget rule and whether the rule should be supported.