The government’s budget surplus in Finland has risen consistently over the past seven years. To amateur economist disagree as to why this is happened. One argues that a rising budget surplus indicates a growing economy. The other argues that it shows that the government is using contractionary fiscal policy. Can you determine which argument is correct? If not, why not?
Answer - The government using the contractionary monetary policy is more appropriate statement. The government may sell the treasury bonds through the central bank , may raise the rate of the taxes. Both these policies will squeeze the money from the market and generate more revenue for the government . Hence these two steps may be the reason for the budget surplus in the country.
The government’s budget surplus in Finland has risen consistently over the past seven years. To amateur...
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