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Budget deficit or surplus vary over the business cycle

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One alternative to balancing the budget annually or cyclically is to produce a government budget that would be balanced if the economy were at potential output. Given the cyclical nature of government tax revenues and spending, how would the resulting budget deficit or surplus vary over the business cycle?

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This discusses the budget deficit or surplus vary over the business cycle

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The government budget will be balanced if the economy were at potenital output that is at its near to peak capacity. Now Business cycle will determine the actual output in the economy.

A recession is a situation of falling National income or the aggregate demand consistently in the preceding years. It also leads to the loss of business confidence. Depression is any economic ...

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