Why Does the Budget Surplus Get Smaller or the Deficit

question 350

Essay

Why does the budget surplus get smaller or the deficit get larger, even without discretionary fiscal policy, when unemployment increases?

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Definitions:

Consumer Surplus

The divergence between the price consumers are willing to pay and what they really spend on a good or service.

Floor Price

The minimum price set by regulation, often by the government, below which a commodity cannot legally be sold in the market.

Market Supply

The total amount of a specific good or service that is available to consumers in a market at a given time and price.

Equilibrium Price

Equilibrium price is the price at which the quantity of a good demanded by consumers equals the quantity supplied by producers, leading to market stability.