Question

A Balanced Budget is typically used in which situation?

Options

• During inflation, to reduce aggregate demand

• A stable economy (classical view)

• During depression/recession, to boost aggregate demand

• During war and emergencies, as the most effective tool

Answer 1

A Balanced Budget, where receipts equal expenditure, is used in a stable economy and reflects the classical view. It is not designed to counter inflation (surplus budget) or recession (deficit budget), and it is less effective during war and emergencies.