The FRBM Act mandates the government to target a specific fiscal deficit ratio. What macroeconomic impact does adhering to this target have, particularly in terms of economic cycles?
1
It enhances economic stability by reducing procyclicality in fiscal policies.
2
It constrains government spending during economic downturns, potentially worsening recessions.
3
It increases the government's reliance on external borrowing.
4
It decreases the overall tax burden on the economy.
5
It mandates an increase in capital expenditure relative to revenue expenditure.