ECON 20B Lecture Notes - Lecture 29: Government Budget Balance, Output Gap, Deficit Spending
ECON 20B verified notes
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ECON 20B Lecture Notes - Lecture 28: Fiscal Year, Generational Accounting, Fiscal Imbalance
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ECON 20B Lecture Notes - Lecture 29: Government Budget Balance, Output Gap, Deficit Spending
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ECON 20B Lecture Notes - Lecture 30: Federal Open Market Committee, Federal Reserve Act, Federal Reserve System
Document Summary
Econ 20b - lecture 29 - fiscal policy (cont. ) Needs-tested spending is spending on programs that entitle suitably qualified people and businesses to receive benefits benefits that vary with need and with the state of the economy. Induced taxes and needs-tested spending decrease the multiplier effects of change in autonomous expenditure and moderate both expansions and recessions and make real gdp more stable. Because government tax revenues fall and outlays increase in a recession, the budget provides automatic stimulus that helps to shrink the recessionary gap. Similarly, because tax revenues rise and outlays decrease in a boom, the budget provides automatic restraint to shrink an inflationary gap. Fluctuations in the government budget balance over the business cycle create a need to distinguish between the budget"s cyclical balance and structural balance. Structural surplus or deficit - the budget balance that would occur if the economy were at full employment.
