full-employment budget

The full-employment budget is a concept used in government budgeting that focuses on the receipts and expenditures that would occur if the economy were operating at full employment. This approach prioritizes the budget's influence on the national economy over actual current expenditures and receipts.1

In times of recession, a budget deficit might be presented as a necessary step to achieve a balanced budget at full employment. The U.S. developed this type of budget during World War II, and other countries have adopted similar measures to aid policy-making. This concept helps to adjust the simple measure of budget deficit or surplus to account for the effects of deviations from a normal or "full" employment level.12