If a budget is cyclically balanced, the government should run a surplus when the economy experiences a contractionary gap. Group of answer choices True False
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A cyclically balanced budget is one where the government aims to balance its budget over the economic cycle, meaning it runs surpluses during economic expansions and deficits during economic contractions. Show more…
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In a cyclically balanced budget approach to federal finance, a budget surplus would occur during a recession. The federal budget would be balanced over a four-year presidential term. Surpluses from economic expansions would cancel out deficits from economic downturns. The federal government would raise spending or reduce taxes during an economic expansion.
Jennifer S.
What is the cyclically adjusted budget deficit or surplus? Suppose that real GDP is currently at potential GDP, and the federal budget is balanced. If the economy moves into a recession, what will happen to the federal budget?
Fiscal Policy
Deficits, Surpluses, and Federal Government Debt
A cyclically-adjusted budget balance: a. shows what the budget balance would be when there is a significant amount of cyclical unemployment. b. is an estimate of what the budget balance would be if real GDP were equal to potential output. c. is a good indicator of the structural deficit that exists in the economy. d. is the same as the national debt and it rises as interest cost is accrued. e. estimates the actual budget balance if the unemployment rate were equal to zero.
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