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October 20, 2014

Homework Help: Economics

Posted by Paul on Sunday, July 16, 2006 at 7:29pm.

When the economy is at full employment, should the federal government run a budget deficit, surplus . Or neither? Explain.


Remember WWII? The US was at full employment then...but the expenditures great.
I am not and economics person, but the above example might lend one to think that there are other factors invoved besides employment.



Thanks, Bob Pursley. I hadn't thought of that angle -- that necessary and unusually high expenses are good reasons for running a budget deficit, even with high employment.


When the government, a company, or an individual runs a budget deficit, interest is paid on the amount owed. Why should we run a deficit when we have the money (i.e., full employment) to pay for the necessary goods and services? A surplus can be used to pay for additional services for the country's citizens and provide a cushion for any hard times that may lie ahead.


Thanks Ms. Sue! That makes a lot of sense!


You're welcome! Please also see BobPursley's and my answers about times with full employment but extraordinally high and necessary expenses.

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