Economics - Economic Activity - Demand Factors - Budgetary Action
If, as in recent years, the Federal Government reduces the size of its
budget deficit and moves into surplus, less liquidity  is injected into
the economy, contributing to slower economic activity. On the other hand,
as the government moves into surplus, it does not need to borrow funds,
which should help reduce interest rates and boost economic activity (a
crowding in effect). Specific budgetary measures also have the potential to
affect aggregate demand, including changes to company tax, depreciation
allowances  and investment allowances.
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