4. Last year, while an economy was in a recession, government spending was $595 billion and government
Question:
4. Last year, while an economy was in a recession, government spending was $595 billion and government revenue was
$505 billion. Economists estimate that if the economy had been at its full-employment level of GDP last year, government spending would have been $555 billion and government revenue would have been $550 billion. Which of the following statements about this government’s fiscal situation are true? LO33.3
a. The government has a non–cyclically adjusted budget deficit of $595 billion.
b. The government has a non–cyclically adjusted budget deficit of $90 billion.
c. The government has a non–cyclically adjusted budget surplus of $90 billion.
d. The government has a cyclically adjusted budget deficit of
$555 billion.
e. The government has a cyclically adjusted budget deficit of
$5 billion.
f. The government has a cyclically adjusted budget surplus of
$5 billion.
Step by Step Answer: