Given the information provided I think each of the policy makers are correct Although each make a seemingly different argument for why the budget surplus has risen when I reviewed and analyzed the statements independently it seems as though both are stating the same principle From my understanding of the text the government will have a rise in budget surplus in both of the situations if the economy is growing and if Macroland uses a contractionary fiscal policy Fiscal policy is the use of government spending and taxation to influence the economy Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty If the government uses contractionary fiscal policy then the government purchases fewer goods and services increases taxes or reduces government transfers These three changes just mentioned that the government can make would cause an increase in the budget surplus Similarly when the economy grows tax revenue increases and government transfers decrease also leading to a rise in the government s budget surplus
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