Asked by Katrina Kazandjian on May 21, 2024
Verified
In the short run,a surplus federal budget _____.
A) reduces national saving
B) boosts domestic saving
C) stimulates aggregate demand
D) promotes economic growth in the long run
E) increases the federal debt
Surplus Federal Budget
A situation where the federal government's revenues exceed its expenditures within a given fiscal period.
National Saving
The total saving of a country, composed of the savings accumulated by both the private sector and the government, available for investment.
Aggregate Demand
A complete tally of the demand for goods and services in an economy, at an agreed upon price level during a precise time period.
- Understand the effects of decisions made in the federal budget on economic measures such as aggregate demand and national savings.
Verified Answer
DR
Dishalene RamasamyMay 27, 2024
Final Answer :
B
Explanation :
A surplus federal budget means that the government is collecting more revenue than it is spending. This can boost domestic saving as the government can lend the surplus funds to individuals, businesses, or other countries who can use the funds to invest and save. This can ultimately lead to increased economic growth in the long run. However, in the short run, the surplus may not necessarily stimulate aggregate demand, as the government is not injecting additional funds into the economy through spending.
Learning Objectives
- Understand the effects of decisions made in the federal budget on economic measures such as aggregate demand and national savings.