Assume that in order to pay for the higher government expenditure, lawmakers enacts a $500 billion spending increase and a $500 billion tax increase. This balanced-budget strategy increased aggregate demand by $500 billion.
A budget that is balanced (especially one for a government) has revenues that are equal to expenditures. As a result, there is neither a budget deficit nor a surplus (the accounts balance). In a broader sense, it refers to a budget that has no fiscal deficit but might have a surplus. A budget that runs a surplus in boom years and a deficit in lean years and eventually balances out over time is said to be cyclically balanced. This means that it is not necessarily balanced year to year. Having a balanced budget .
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