Macroeconomics + Economy 2009 Update 18th Edition by Campbell McConnell, Sean Masaki Flynn,Stanley Brue

Exercise 10

Explain the difference between "active" discretionary fiscal policy advocated by mainstream economists and "passive" fiscal policy advocated by new classical economists. Explain: "The problem with a balanced-budget amendment is that it would, in a sense, require active fiscal policy-but in the wrong direction-as the economy slides into recession."