It is likely that a constitutional amendment that required the government always to run a balanced budget would
A)contribute to a more stable level of output.
B)mitigate the crowding-out effect.
C)eliminate the economy's automatic stabilizers.
D)result in zero percent inflation.

Question

Quizplus · Accepted Answer

A constitutional amendment requiring a balanced budget would eliminate the economy's automatic stabilizers. Automatic stabilizers, such as progressive taxes and welfare programs, help to moderate the fluctuations in the economy by automatically increasing government spending or decreasing taxes when the economy slows, and doing the opposite when the economy grows. A requirement for a balanced budget every year would prevent these automatic adjustments, as any deficit spending or tax cuts in response to economic downturns would be unconstitutional.

It Is Likely That a Constitutional Amendment That Required the Government