Suppose we have the following information for 2010:

Potential output: $22 trillion

Actual output: $20 trillion

Actual Deficit: $600 billion

Tax Rate: 20%

What is the cyclical deficit in 2010? What could be causing the cyclical deficit?

A) $400 billion;a recession, which would decrease output andtax revenues

B) $200 billion;social welfare programs whoseexpenditures are larger than the revenues that they collect

C) $200 billion;a recession, which would decrease output andtax revenues

D) $400 billion;social welfare programs whoseexpenditures are larger than the revenues that they collect