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Suppose that the income tax rate is reduced by the federal government and simultaneously a recession hits causing the economy to move below its potential

Suppose that the income tax rate is reduced by the federal government and simultaneously a recession hits causing the economy to move below its potential output, this will: 


raise both the cyclical and structural deficits.



reduce the cyclical deficit but raise the structural deficit. 



reduce both the cyclical and structural deficits. 



raise the cyclical deficit but reduce the structural deficit.

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