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3. a) Why is the cyclically adjusted budget balance (CABB) a useful concept? b) Use a diagram to show how a 'contractionary' fiscal stance can
3. a) Why is the cyclically adjusted budget balance (CABB) a useful concept? b) Use a diagram to show how a 'contractionary' fiscal stance can appear to be 'expansionary' at a different point in the economic cycle. c) Show how your analysis in parts (a) and (b) can be applied to UK fiscal policy between (approximately) 2002 and 2007, i.e. pre-financial crisis?
Contractionary fiscal stance B B + Budget surplus FPA Bo I FP X Fiscal policy C+ Expansionary looks - fiscal stance - - reasonable - here but the Budget Deficit Co deficit is not large enough C 0 Downturn Boom Output gapStep by Step Solution
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