Question

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Students are required to use information and tools that they have accumulated in their study of the text and evaluate both sides of those issues, determine which side they can support for each issue, and defend their positions.

1) Balanced government budget

2) Increased government spending to fight recessions

Please help me evaluate both the advocates' position and the critics' position.

Please help me determine which position you support and defend your position.

Answer 1

1) Balanced government budget :

Pros : No debt left for the future generation to bear . If interest rates fluctuate government will lose money if there is a large withstanding debt . Deficits reduce national savings , which creates smaller stock of capital hampering productivity of the economy .

Cons : Budget deficit helps to increase aggregate demand in the economy . Balanced budget maintainance puts pressure on the present tax payers . Government spending more on welfare activities and transfer payments is beneficial for the economy .

Balancing budget reduces growth and GDP of the economy . Government spending doles an economy out of recession . But spending should not be excessive because then the crowding out effect would be very large .