The International Monetary Fund (IMF) publishes The World Economic Outlook. Go to www.imf.org and find the IMF data for the cyclically adjusted budget deficit as a percentage of potential GDP (which the IMF calls “General Government Structural Balance”) for Brazil, China, France, and Germany from 2000 to 2020. (The values for the later years are forecasts.) Use the series for the cyclically adjusted budget deficit that is measured as a percentage of potential GDP. (Under World Economic Outlook, click “DATABASE,” then under “Download WEO Data” choose “By Countries (country-level data).” Select “All economies,” choose Brazil, China, France, and Germany, and then choose “General government structural balance, Percent of potential GDP.”)
a. Download the data and plot them in a graph. Which country relied the most on discretionary fiscal policy in response to the financial crisis of 2008 and 2009? Briefly explain how you are able to tell.
b. From 2013 to 2018, which of these four countries is expected to have the most expansionary fiscal policy? Briefly explain.