Answer to Question #223742 in Macroeconomics for zaman

Question

Why might we prefer to use cyclically adjusted surplus and structural surplus terms for full-employment budget surplus

Answer 1

When pursuing a surplus policy aimed at achieving full employment, the question arises of assessing its effectiveness. But this problem is quite complex due to the fact that not every state budget deficit is associated with an active budget policy.

Along with such a deficit (it can be called active), there is also a massive deficit. Its peculiarity is that it does not arise as a result of actions of the state, but due to a decrease in the value of national income in the private sector of the economy. A decrease in investment activity of subjects of the private economy gives a corresponding multiplier effect, which is manifested in the reduction of national income. This leads to a reduction in taxable income and, consequently, to a decrease in the total amount of tax revenues.