Question

Question: What is meant by the balance of savings and investment? Do you think the government should try to balance the budget in the short-run or the long-run? Discuss what is meant by the sustainability of fiscal policy. (at least six complete sentences.)

Answer 1

Answer -

Balance of savings and investments - According to economics balance of saving and investmennts is a balance of national savings and national investmennts,which equals to current account balance.According to Keneys economy in equilibrium is possible only when savings is equal to investment.Balance of savings and investments is essential for financial growth.

Government should try to balance the budget in the long run and short run as balanced budget decreses interest rates, increase investments,reduce trade deficit and it helps the economic growth at fast rate. A balanced budget also helps the government to increase spending for welfare activities and lower taxes in recession perio

Sustainability of fiscal sustainability is the government's ability to sustain or maintain its current spending, tax and other policies without disturbing current solvency position.

The great evidence of sustainability is it reduces the fluctuations in the debt -GDP ratio.Fiscal sustainability creates confience in the minds of people for price stability, financial stability.Sustainable fiscal policy facilitates public expenditure for economic development.