Question

A balanced budgeted amendment

		would require the government to limit spending to the amount of tax revenue.
		would be generally perceived as procylical in nature.
		Both a and b
		None of the above

A structural balance rule

		Would subject polititians to a more objective spending goal
		Would allow for deficits in recessionary periods and force the government to have surpluses in expansionary periods
		Requires estimation of an economies output gap.
		All of the above

Answer 1

a) the balanced budget amendment will force the government to decrease the deficit and make it equal to the tax revenues. it will be pro cyclical i.e.as the income rise the budget will rise and vice versa. both the statement are correct.

b) Structural balance rule means that the government have to manage the neutral budget or the budget that they will have at potential output. it will involve deficit in the recession and surplus at boom. and it will require output mapping. All the statements are correct.