Federal government calculates the budget on a fiscal year

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The federal government calculates the budget on a fiscal year that begins each year on October 1 and ends the following September 30. At the beginning of the 2005 fiscal year, the Congressional Budget Office [CBO] forecast that the federal budget deficit would be $368 billion. The actual budget deficit for fiscal 2005 was only $319 billion. Federal expenditures were $37 billion less than the CBO had forecast, and federal revenue was $12 billion more than the CBO had forecast.

a. Is it likely that the economy grew faster or more slowly during fiscal 2005 than the CBO has expected? Explain your reasoning.

b. Suppose that Congress and the president were committed to balancing the budget each year. Does what happened during 2005 provide any insights into difficulties they might run into in trying to balance the budget every year?

Reference no: EM13836309

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