Actual Federal budget deficits can go up or down because of changes in GDP, changes in fiscal
Question:
Actual Federal budget deficits can go up or down because of changes in GDP, changes in fiscal policy, or both. Deficits caused by changes in GDP are called cyclical deficits. The cyclically adjusted budget removes cyclical deficits from the budget and therefore measures the budget deficit or surplus that would occur if the economy operated at its fullemployment output throughout the year. Changes in the cyclical-budget deficit or surplus provide meaningful information as to whether the government’s fiscal policy is expansionary, neutral, or contractionary. Changes in the actual budget deficit or surplus do not, since such deficits or surpluses can include cyclical deficits or surpluses.
Step by Step Answer:
Economics Principles Problems And Policies
ISBN: 9780073511443
19th Edition
Authors: Campbell Mcconnell ,Stanley Brue ,Sean Flynn