• Structural Balance §

  Formed by the government’s deliberate decisions regarding;
  • spending and;
  • Taxation
• Determines the Budget Stance
• Ideally would equal 0 at potential GDP (Full Employment)

• Cyclical Balance §

Formed by the actual effect of Automatic Stabilisers

The Balance & The Stance §

The stance of Fiscal Policy is determined by the Structural Balance. We are only in an expansionary Stance if the Structural Balance is in deficit, and only in a contractionary stance if it is in Surplus. The Cyclical Component does not tell us this.

• We can not seperate the parts of the budget that are Cyclical & those that are Discretionary with full accuracy
  • The Government provides estimates however.